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UNITED
STATES
SECURITIES
AND EXCHANGE COMMISSION
Washington,
DC 20549
 
FORM
10-K
 
(Mark
One)
 


☒
ANNUAL
    REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934

 
For
the fiscal year ended January 31, 2024
 
OR
 


☐
TRANSITION
    REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934

 
For
the transition period from ___________to___________
 
Commission
File Number: 000-28132
 
STREAMLINE
HEALTH SOLUTIONS, INC.
(Exact
name of registrant as specified in its charter)
 


Delaware
 
31-1455414

(State
    or other jurisdiction of
 
(I.R.S.
    Employer

incorporation
    or organization)
 
Identification
    No.)

 
2400
Old Milton Pkwy., Box 1353
Alpharetta,
GA 30009
(Address
of principal executive offices) (Zip Code)
 
(888)
997-8732
(Registrant’s
telephone number, including area code)
 
Securities
registered pursuant to Section 12(b) of the Act:
 


Title
    of each class
 
Trading
    Symbol
 
Name
    of each exchange on which registered

Common
    Stock, $0.01 par value per share
 
STRM
 
Nasdaq
    Capital Market

 
Securities
registered pursuant to Section 12(g) of the Act:
None
 
Indicate
by check mark if the registrant is a well-known seasoned issuer, as defined in Rule 405 of the Securities Act. Yes ☐ No ☒
 
Indicate
by check mark if the registrant is not required to file reports pursuant to Section 13 or Section 15(d) of the Act. Yes ☐ No ☒
 
Indicate
by check mark whether the registrant (1) has filed all reports required to be filed by Section 13 or 15(d) of the Securities Exchange
Act of 1934 during the preceding 12 months (or for such shorter period that the registrant was required to file such reports), and (2)
has been subject to such filing requirements for the past 90 days. Yes ☒ No ☐
 
Indicate
by check mark whether the registrant has submitted electronically every Interactive Data File required to be submitted pursuant to Rule
405 of Regulation S-T during the preceding 12 months (or for such shorter period that the registrant was required to submit such files).
Yes ☒ No ☐
 
Indicate
by check mark whether the registrant is a large accelerated filer, an accelerated filer, a non-accelerated filer, a smaller reporting
company or an emerging growth company. See the definitions of “large accelerated filer,” “accelerated filer”,
“smaller reporting company” and “emerging growth company” in Rule 12b-2 of the Exchange Act. (Check one):
 


Large
    accelerated filer ☐
 
Accelerated
    filer ☐
 
Non-accelerated
    filer ☒
 
Smaller
    reporting company ☒

 
 
 
 
 
 
 

Emerging
    growth company ☐
 
 
 
 
 
 

 
If
an emerging growth company, indicate by check mark if the registrant has elected not to use the extended transition period for complying
with any new or revised financial accounting standards provided pursuant to Section 13(a) of the Exchange Act. ☐
 
Indicate
by check mark whether the registrant has filed a report on and attestation to its management’s assessment of the effectiveness
of its internal control over financial reporting under Section 404(b) of the Sarbanes-Oxley Act (15 U.S.C. 7262(b)) by the registered
public accounting firm that prepared or issued its audit report. ☐
 
If
securities are registered pursuant to Section 12(b) of the Act, indicate by check mark whether the financial statements of the registrant
included in the filing reflect the correction of an error to previously issued financial statements. ☐
 
Indicate
by check mark whether any of those error corrections are restatements that required a recovery analysis of incentive-based compensation
received by any of the registrant’s executive officers during the relevant recovery period pursuant to §240.10D-1(b). ☐
 
Indicate
by check mark whether the registrant is a shell company (as defined in Rule 12b-2 of the Exchange Act). Yes ☐ No ☒
 
The
aggregate market value of the voting and non-voting common stock held by non-affiliates of the registrant, computed using the closing
price as reported by The NASDAQ Stock Market, Inc. for the Registrant’s Common Stock on July 31, 2023, the last business day of
the Registrant’s most recently completed second fiscal quarter, was $57,165,443.
 
The
number of shares outstanding of the Registrant’s Common Stock, $0.01 par value per share, as of April 26, 2024 was 65,362,533.
 
Documents
incorporated by reference:
 
Information
required by Part III is incorporated by reference from the Registrant’s Proxy Statement for its 2024 annual meeting of stockholders
or an amendment to this Annual Report on Form 10-K, which will be filed with the Securities and Exchange Commission within 120 days after
the end of its fiscal year ended January 31, 2024.

 
 

 

 
 


 
FORWARD-LOOKING
STATEMENTS
 
We
make forward-looking statements in this Annual Report on Form 10-K (the “Report”) and in other materials we file with the
Securities and Exchange Commission (“SEC”) or otherwise make public. These statements about future events and expectations
are “forward-looking” within the meaning of Sections 27A of the Securities Act of 1933, as amended, and 21E of the Securities
Exchange Act of 1934, as amended (the “Exchange Act”). In this Report, both Part I, Item 1, “Business,” and Part
II, Item 7, “Management’s Discussion and Analysis of Financial Condition and Results of Operations,” contain forward-looking
statements. In addition, our senior management makes forward-looking statements to analysts, investors, the media, and others. Statements
with respect to expected revenue, income, receivables, backlog, client attrition, acquisitions and other growth opportunities, sources
of funding operations and acquisitions, the integration of our solutions, the performance of our channel partner relationships, the sufficiency
of available liquidity, research and development, and other statements of our plans, beliefs or expectations are forward-looking statements.
These and other statements using words such as “anticipate,” “believe,” “estimate,” “expect,”
“intend,” “plan,” “project,” “target,” “can,” “could,” “may,”
“should,” “will,” “would” and similar expressions also are forward-looking statements. Each forward-looking
statement speaks only as of the date of the particular statement. The forward-looking statements we make are not guarantees of future
performance, and we have based these statements on our assumptions and analyses in light of our experience and perception of historical
trends, current conditions, expected future developments and other factors we believe are appropriate under the circumstances. Forward-looking
statements by their nature involve substantial risks and uncertainties that could significantly affect expected results, and actual future
results could differ materially from those described in such statements. Management cautions against putting undue reliance on forward-looking
statements or projecting any future results based on such statements or present or historical earnings levels.
 
Among
the factors that could cause actual future results to differ materially from our expectations are the risks and uncertainties described
in Part I, Item 1A, “Risk Factors” herein, and the other cautionary statements in other documents we file with the SEC, including
the following:
 


 
●
competitive
    products and pricing;

 
 
 

 
●
product
    demand and market acceptance;

 
 
 

 
●
entry
    into new markets;

 
 
 

 
●
the
    possibility that any of the anticipated benefits of the acquisition of Avelead Consulting, LLC (“Avelead”) will not be
    realized or will not be realized within the expected time period, the businesses of the Company and the Avelead segment may not be
    integrated successfully or such integration may be more difficult, time-consuming or costly than expected, customers may terminate
    and/or decrease the use of our products and services, or revenues following the Avelead acquisition may be lower than expected;

 
 
 

 
●
new
    product and services development and commercialization;

 
 
 

 
●
key
    strategic alliances with vendors and channel partners that resell our products;

 
 
 

 
●
uncertainty
    in continued relationships with clients due to termination rights;

 
 
 

 
●
our
    ability to control costs;

 
 
 

 
●
availability,
    quality and security of products produced and services provided by third-party vendors;

 
 
 

 
●
the
    healthcare regulatory environment;

 
 
 

 
●
potential
    changes in legislation, regulation and government funding affecting the healthcare industry;

 

2
 

 


 
●
healthcare
    information systems budgets;

 
 
 

 
●
availability
    of healthcare information systems trained personnel for implementation of new systems, as well as maintenance of legacy systems;

 
 
 

 
●
the
    success of our relationships with channel partners;

 
 
 

 
●
fluctuations
    in operating results;

 
 
 

 
●
our
    future cash needs;

 
 
 

 
●
the
    consummation of resources in researching acquisitions, business opportunities or financings and capital market transactions;

 
 
 

 
●
the
    failure to adequately integrate past and future acquisitions into our business;

 
 
 

 
●
critical
    accounting policies and judgments;

 
 
 

 
●
changes
    in accounting policies or procedures as may be required by the Financial Accounting Standards Board or other standard-setting organizations;

 
 
 

 
●
changes
    in economic, business and market conditions impacting the healthcare industry and the markets in which we operate;

 
 
 

 
●
our
ability to maintain compliance with the terms of our credit facilities; and

 
 
 

 
●
the
    extent to which health epidemics and other outbreaks of communicable diseases could disrupt our operations and/or materiality and
    adversely affect our business and financial conditions;

 
 
 

 
●
our
    ability to maintain compliance with the continued listing standards of the Nasdaq Capital Market (“Nasdaq”).

 
Most
of these factors are beyond our ability to predict or control. Any of these factors, or a combination of these factors, could materially
affect our future financial condition or results of operations and the ultimate accuracy of our forward-looking statements. There also
are other factors that we may not describe (generally because we currently do not perceive them to be material) that could cause actual
results to differ materially from our expectations.
 
We
expressly disclaim any obligation to update or revise any forward-looking statements, whether as a result of new information, future
events or otherwise, except as required by law.
 

3
 


 
PART
I
 
Item
1. Business
 
Company
Overview
 
Incorporated
in 1989, Streamline Health Solutions, Inc. is a provider of solutions and services in the middle of the revenue cycle for healthcare
providers throughout the United States and Canada. Streamline Health’s technology helps hospitals improve their financial performance
by optimizing data and coding for every patient encounter prior to bill submission. By performing these activities before billing, providers
can drive net revenue through reduced revenue leakage, overbilling, and days in accounts receivable. This enables providers to achieve
more predictable revenue streams using technology rather than manual intervention.
 
The
Company provides software solutions, professional consulting, and auditing services, which capture, aggregate,
and translate structured and unstructured data to deliver intelligently organized, easily-accessible predictive insights to its clients.
Hospitals and certain hospital-owned-and operated physician groups use the knowledge generated by Streamline Health to help them improve
their financial performance.
 
The
Company’s software solutions are delivered to clients either by access to the Company’s hosted web applications in the cloud through a secure
connection, commonly referred to as a software as a service (“SaaS”) delivery method, or by a fixed-term or perpetual license, where such software
is installed locally in the client’s data center.
 
The
Company operates exclusively in one segment as a provider of health information technology solutions and associated services that improve
healthcare processes and information flows within a healthcare facility. The Company sells its solutions and services in North America
to hospitals and health systems through its direct sales force and its reseller partnerships.
 
Unless
the context requires otherwise, references to “Streamline Health,” the “Company,” “we,” “us”
and “our” in this Report are intended to mean Streamline Health Solutions, Inc. and its wholly-owned subsidiaries. All references
to a fiscal year refer to the fiscal year commencing February 1 in that calendar year and ending on January 31 of the following calendar
year.
 
Solutions
 
The
Company offers solutions and services to assist its clients in revenue cycle management including its two flagship technologies
RevIDTM and eValuatorTM. RevID offers automated, daily reconciliation of clinical event activity to patient
billing charge items prior to billing. eValuator provides 100% automated coding analysis prior to billing. In addition, the Company
offers an array of professional services, including system implementation. The Company’s solutions and services are designed
to improve the flow of critical revenue cycle information throughout the enterprise. The solutions and services help to transform the
structure of information between disparate information technology systems into actionable data, giving the end user comprehensive
access to clinical and business intelligence to enhance billing accuracy and decision-making. Solutions can be accessed securely
through SaaS or delivered either by a perpetual license or by a fixed-term license installed locally.
 
RevID
Automated Revenue Reconciliation – RevID is a cloud-based SaaS solution that delivers automated, daily charge
reconciliation. RevID identifies discrepancies between a provider’s clinical and billing departments and ensures that
every medical service is tracked, accounted for, and ultimately accurately billed, thereby reducing revenue leakage. RevID functions
on a pre-bill basis, allowing providers to catch mistakes and discrepancies prior to billing.
 

4
 


 
eValuator
Coding Analysis Platform – This technology is a cloud-based SaaS solution that delivers the capability of fully automated
analysis on 100% of billing codes entered by a healthcare provider’s coding team. This is done on a pre-bill basis, enabling providers
to identify and address their highest-impact cases prior to billing. Rule sets are enabled for inpatient, outpatient and pro-fee cases.
With eValuator, providers can add an audit function on a pre-bill basis to all cases, allowing the provider to better optimize reimbursements
and mitigate risk on its billing practices.
 
Data
Comparison Engine (“DCE” or “Compare”) – Compare is a cloud-based SaaS system synchronization module
that reconciles data in different software used by hospitals within their operations. Compare operates continuously and automates the
reconciliation of these systems to identify discrepancies or errors occurring between systems. Additionally, the Compare module can be
utilized as a maintenance check when a hospital adds additional disparate software systems or converts to a new software system.
 
Coding
& CDI Solutions – CDI provides an integrated on-premise or cloud-based software suite that enhances the productivity
of CDI and Coding staff and enables the seamless sharing of patient data. This suite of solutions includes workflows such as CDI, Abstracting
and Physician Query.
 
Financial
Management Solutions (FMBA) – FMBA has been sunset by the Company. FMBA solutions enable financial staff across the healthcare
enterprise to drill down quickly into actionable and real-time financial data and key performance indicators to improve revenue realization.
This suite of solutions includes individual workflows such as accounts receivable management, denials management, claims processing,
spend management and audit management. 
 
Professional
Services
 
Audit
and Coding Services — The Company provides technology-enabled audit and coding services to help clients review and optimize
their internal clinical documentation and coding functions across the applicable segment of the client’s enterprise. The Company offers its Audit and Coding services to primarily support eValuator
clients by expanding audit capacity to drive net revenue retention rates. The Company
provides these services using experienced coders and auditors through use of its eValuator proprietary software to improve the targeting
of records with the highest likelihood of requiring an audit. The audit services are provided for inpatient diagnostic-related group
(DRG) code auditing, outpatient ambulatory payment classification (APC) auditing, hierarchical condition categories (HCC) auditing and
Physician/Pro-Fee services coding and auditing.
 
Software
Services – Software services relates to implementation of our core software modules, including data collection, configuration
of the software based on the clients’ needs, training and support. Support services include non-specified upgrades to the software.
 
Professional
Services – The Company’s professional services are typically associated with hospital revenue cycle assistance and
include troubleshooting, staff augmentation and “ad hoc” services. Services may include, but are not limited to, review of
workflow processes, development and optimization of new workflows, optimization of interfaces, performance of audits and reconciliations,
interim resources and project management of system implementations or conversions. The Company has replaced its emphasis on professional
services with technology solutions. The Company’s premise is that technology on the front end of the revenue cycle process will
reduce waste and errors in the coding and the backend.
 

5
 

 
Clients
and Strategic Partners
 
The
Company provides transformational, data-driven solutions to some of the most well-respected healthcare enterprises
in the United States and Canada. The Company provides these solutions
through a combination of direct sales and relationships with strategic channel partners.
 
During
fiscal 2023, one individual client accounted for 10% or more of our revenue and represented approximately $5.1 million of total
revenue. During fiscal 2022, two individual clients accounted for 10% or more of our revenue and represented approximately $7.9
million of total revenue. A SaaS client who accounted for approximately $4.4 million, or 19%, and $4.2 million, or 17%, of our
revenues for fiscal 2023 and fiscal 2022, respectively, did not renew a contract with the Company, effective December 31, 2023. Four
clients represented 14%, 12%, 12% and 11% respectively, of accounts receivable as of January 31, 2024, and four clients represented
13%, 12%, 12% and 10%, respectively, of accounts receivable as of January 31, 2023. Many of our clients are invoiced on an annual
basis.
 
For
more information regarding our major clients, please see “Risks Relating to Our Business - Our sales have been concentrated in
a small number of clients” in Part 1, Item 1A, “Risk Factors” herein.
 
Acquisitions
 
The
Company regularly evaluates opportunities for acquisitions for portions of the Company that may not align with current
growth strategies.
 
The
Company acquired all of the equity interests of Avelead as part of the Company’s strategic expansion into the revenue cycle management,
acute-care healthcare space. The acquisition was completed on August 16, 2021. The aggregate consideration for the purchase of Avelead
was approximately $29.7 million (at fair value) consisting of (i) $12.5 million in cash, net of cash acquired, (ii) $6.5 million in common
stock, and (iii) approximately $10.7 million in contingent consideration. The Company issued 5,021,972 shares of its restricted common
stock to Avelead equity holders in connection with the acquisition. See Note 3 - Business Combination to our consolidated
financial statements included in Part II Item 8, “Financial Statements and Supplementary Data” for additional information
regarding the acquisition.
 
Business
Segments
 
The Company has determined it has only one operating segment
based on the guidance of ASC 280-10-50 paragraphs 1 through 8, The Company has a sole chief operating decision
maker who reviews a single set of financials, information, has accountability for the performance of the organization, and allocates resources
to drive success.
 
For
fiscal 2022, the Company had two reporting units for evaluation of goodwill: Streamline Solutions and Avelead Solutions. The Company
determined that, effective January 1, 2023, it has one reporting unit for purposes of evaluation of goodwill, which was used for evaluation of goodwill for fiscal 2023. At the end of fiscal 2022,
the Company consolidated and combined its operations for Streamline Solutions and Avelead Solutions. For total assets at January 31,
2024 and 2023 and total revenue and net loss for the fiscal years ended January 31, 2024 and 2023, see our consolidated financial statements
included in Part II, Item 8, “Financial Statements and Supplementary Data” herein.
 
Contracts,
License and Services Fees
 
The
Company enters into agreements with its clients that specify the scope of the system to be installed and/or services to be provided by
the Company, as well as the agreed-upon pricing, applicable term duration and the timetable for the associated licenses and services.
 

6
 

 
For
clients purchasing software to be installed locally or provided on a SaaS model, there are multiple performance obligations that include
either a perpetual or term license and right to access the applicable software functionality (whether installed locally at the client
site or the right to use the Company’s solutions as a part of SaaS services), terms regarding maintenance and support services,
and professional services for implementation, integration, process engineering, optimization and training, as well as fees and payment
terms for each of the foregoing. If the client purchases solutions on a perpetual license model, the client is billed the license fee
up front. Maintenance and support is provided on a term basis for separate fees, with an initial term typically from one to five years
in length. The maintenance and support fee is charged annually, in advance, commencing either upon contract execution or deployment of
the solution in live production. If the client purchases solutions on a term-based model, the client is billed periodically a combined
access fee for a specified term, typically from one to seven years in length. The access fee includes the access rights along with all
maintenance and support services.
 
The
Company also generally provides software and SaaS clients professional services for implementation, integration, process
engineering, optimization and training. These services and the associated fees are separate from the license, maintenance and access
fees. Professional services are provided on either a fixed-fee or hourly arrangements billable to clients based on agreed-to payment
milestones (fixed fee) or monthly payment structure on hours incurred (hourly). These services can either be included at the time
the related locally installed software or SaaS solution is licensed as part of the initial purchase agreement or added as an
addendum to the existing agreement for services required after the initial implementation. The Company recognizes revenue for
implementation for certain of its eValuator SaaS solution over the contract term, as it has been determined that those
implementation services are not a distinct performance obligation, whereas for other SaaS and Software solutions such as Coding
& CDI, RevID and Compare, it has been determined that its implementation services are a distinct performance obligation and,
accordingly, are recognized separately as professional services.
 
Audit
and Coding services are provided through a stand-alone services agreement or services addendum to an existing master
services agreement with the client. These review services are available as either a one-time service or recurring monthly, quarterly
or annual review structure. These services are typically provided on a per reviewed account/chart basis. Monthly minimums are
required where material discounts have been offered. Revenue is generally recognized when the chart is reviewed (i.e, service is
completed).
 
The
commencement of revenue recognition on software solutions varies depending on the size and complexity of the system and/or services involved,
the implementation or performance schedule requested by the client and usage by clients of SaaS for software-based components. The Company’s
agreements are generally non-cancellable but provide that the client may terminate its agreement upon a material breach by the Company
and/or may delay certain aspects of the installation or associated payments in such events. The Company does allow for termination for
convenience in certain situations. Therefore, it is difficult for the Company to accurately predict the revenue it expects to achieve
in any particular period, and a termination or installation delay of one or more phases of an agreement, or the failure of the Company
to procure additional agreements, could have a material adverse effect on the Company’s business, financial condition, and results
of operations, as further discussed in Part 1, Item 1A, “Risk Factors” herein. In the third quarter of fiscal 2023, the Company
received a notice from a significant SaaS client who accounted for approximately 19% and 17% of our  revenue for
fiscal 2023 and fiscal 2022, respectively, of its intent not to renew its contract following the expiration of the current term on December
31, 2023. With the exception of the foregoing, the Company has not historically experienced a material amount of contract cancellations;
however, the Company sometimes experiences delays in the course of contract performance and the Company accounts for them accordingly.
 
Third-Party
License Fees
 
The
Company incorporates software licensed from various third-party vendors into its proprietary software. The Company licenses these software
products and pays the required license fees when such software is delivered to clients.
 

7
 


 
Associates
 
As
of January 31, 2024, the Company had 77 employees, a net decrease of 35 employees during fiscal 2023. All employees
are full-time employees. The Company utilizes independent contractors to supplement its staff, as needed. None of the Company’s
associates are represented by a labor union or subject to a collective bargaining agreement. The Company has never experienced a work
stoppage and believes that its employee relations are good. The Company’s success depends, to a significant degree, on its management,
sales and technical personnel.
 
For
more information on contracts, backlog, acquisitions and research and development, see also Part II, Item 7, “Management’s
Discussion and Analysis of Financial Condition and Results of Operations”.
 
Competition
 
The
RevID product has competition in charge reconciliation, generally. The Company believes RevID’s automated charge reconciliation
technique is unique in the industry as it interacts with disparate clinical systems identifying unbilled services. There
are products that purport to provide similar services, including FinThrive’s Charge Capture Audit Tool and CloudMed Tool set. The Company anticipates that additional competition may develop as pre-bill, daily charge reconciliation becomes a standard
within the industry.
 
The
eValuator product has numerous competitors in the auditing software industry. The Company believes eValuator is unique in that it is
designed and has the requisite workflow to perform audits on a pre-bill basis. The Company believes it is an industry leader in pre-bill
auditing technology. We have seen competition on similar products that are being utilized by clients as a pre-bill auditing tool, such
as PwC Smart and 3M, however, these similar products are intended to be utilized for post-bill auditing which is a different workflow
than what is necessary for pre-bill auditing. We expect to have competition in the pre-bill technology industry. Client processes dictate
that correcting errors prior to billing is more efficient and effective than having an audit after billing. There will be larger and
more sophisticated competitors than our Company. Accordingly, using the time we have to gain market share prior to direct competition
is critical to the Company’s success.
 
The
Compare product has little direct competition outside of manual reconciliations. The Company believes few systems exist that can
accurately compare the various software systems used by hospitals. Examples of potential competitors include Vitalware, Craneware
and FinThrive’s Chargemaster toolkit. The Company believes Compare is unique because it can be easily fine-tuned to work with
a wide array of hospital systems to create a bespoke offering for specific clients, easing transitions to new platforms or acting as
an ongoing maintenance check tool.
 
Regarding
our Coding and CDI Solutions and eValuator Coding Analysis Platform, several companies historically have dominated the clinical information
system software market. The industry is undergoing consolidation and realignment as companies position themselves to compete more effectively.
Strategic alliances between vendors of other healthcare systems are increasing. Barriers to entry to this market include technological
and application sophistication, the ability to offer a proven product, creating and utilizing a well-established client base and distribution
channels, brand recognition, the ability to operate on a variety of operating systems and hardware platforms, the ability to integrate
with pre-existing systems and capital for sustained development and marketing activities. The Company has many competitors including
clinical information system vendors that are larger, more established and have substantially more resources than the Company.
 
Regarding
our Audit and Coding Services, there are numerous companies and independent consultants who offer these services. Barriers to entry
to this market include creating and utilizing a well-established client base and distribution channels, brand recognition,
establishing differentiators for our services and capital for sustained development and marketing activities.
 
The
Company believes that these obstacles taken together represent a moderate to high-level barrier to entry. The Company believes that the
principal competitive factors in its market are client recommendations and references, company reputation, system reliability, system
features and functionality (including ease of use), technological advancements, client service and support, breadth and quality of the
systems, the potential for enhancements and future compatible products, the effectiveness of marketing and sales efforts, price, and
the size and perceived financial stability of the vendor. In addition, the Company believes that the speed with which companies in its
market can anticipate the evolving healthcare industry structure and identify unmet needs are important competitive factors.
 

8
 


 
Additional
Intellectual Property Rights
 
In
addition to the software licenses described in other sections of this Item 1, “Business”, the Company also holds registered
trademarks for its Streamline Health® and other key trademarks used in selling its products. These marks are currently active, with
registrations being valid for a period of three years each. The Company actively renews these marks at the end of each registration period.
 
Regulations
 
Our
clients derive a substantial portion of their revenue from third-party private and governmental payors, including through Medicare, Medicaid
and other government-sponsored programs. Our clients also have express handling and retention obligations under information-based laws
such as the Health Insurance Portability and Accountability Act of 1996. There are no material regulatory proposals of which the Company
is aware that we believe currently have a high likelihood of passage that we anticipate would have a material impact on the operation
or demand of the Company’s products and services. However, the Company acknowledges there is currently great uncertainty in the
U.S. healthcare market, generally, from a regulatory perspective. In addition, there is regulatory uncertainty in the data and technology
sectors as it relates to information security regulations. Material changes could have unanticipated impact on demand or usability of
the Company’s solutions, require the Company to incur additional development and/or operating costs (on a one-time or recurring
basis) or cause clients to terminate their agreements or otherwise be unable to pay amounts owed to the Company, as further discussed
in Part 1, Item 1A, “Risk Factors” herein.
 
Environmental
Matters
 
We
believe we are compliant in all material aspects with all applicable environmental laws. We do not anticipate that such compliance will
have a material effect on capital expenditures, earnings or the competitive position of our operations.
 
Code
of Business Conduct and Ethics
 
We
have a Code of Business Conduct and Ethics that guides and binds each of our employees, officers and directors which is available on
the “Investor Relations” page of our website, www.streamlinehealth.net, under the “Corporate Governance” tab.
We use an anonymous compliance hotline for employees and outside parties to report potential instances of noncompliance.
 
Available
Information
 
Copies
of documents filed by the Company with the SEC, including annual reports on Form 10-K, quarterly reports on Form 10-Q, current reports
on Form 8-K, proxy statements and all amendments to those reports and statements, if any, can be found at the website http://investor.streamlinehealth.net
as soon as practicable after such material is electronically filed with, or furnished to, the SEC. The information contained on the Company’s
website is not part of, or incorporated by reference into, this Report. Copies can be downloaded free of charge from the Company’s
website or directly from the SEC website, https://www.sec.gov. Also, copies of the Company’s annual report on Form 10-K will be
made available, free of charge, upon written request to the Company, attention: Corporate Secretary, 2400 Old Milton Pkwy, Box 1353,
Alpharetta, GA 30009.
 
Item
1A. Risk Factors
 
An
investment in our common stock or other securities involves a number of risks. You should carefully consider each of the risks described
below before deciding to invest in our common stock or other securities. If any of the following risks develops into actual events, our
business, financial condition or results of operations could be negatively affected, the market price of our common stock or other securities
could decline, and you may lose all or part of your investment.
 

9
 

 
Risks
Relating to Our Business
 
Our
sales have been concentrated in a small number of clients.
 
Our
revenues have been concentrated in a relatively small number of large clients, and we have historically derived a substantial percentage
of our total  revenue from a few clients. For the fiscal years ended January 31, 2024 and 2023, our five largest
clients accounted for 38% and 46%, respectively, of our total  revenue. A client who accounted for approximately
$4.4 million, or 19%, of our revenue for fiscal 2023, and $4.2 million, or 17%, of our revenue
for fiscal 2022, terminated its contract with the Company, effective December 31, 2023. If one or more clients terminate all or any portion
of a master agreement, delay installations or if we fail to procure additional agreements, there could be a material adverse effect on
our business, financial condition and results of operations. See Note 9 - Major Clients to our consolidated financial statements included
in Part II, Item 8, “Financial Statements and Supplementary Data”, herein for further information regarding representation
of the Company’s largest individual major clients.
 
Over
the last several years, we have completed acquisitions, and may undertake additional acquisitions in the future. Any failure to adequately
integrate past and future acquisitions into our business could have a material adverse effect on us.
 
Acquisitions
will require that we integrate into our existing operations separate companies that historically operated independently or as part of
another, larger organization, and had different systems, processes and cultures. Acquisitions may require integration of finance and
administrative organizations and involve exposure to different legal and regulatory regimes in jurisdictions in which we have not previously
operated.
 
Over
the last several years, we have completed acquisitions of businesses through asset and stock purchases. We expect that we will make additional
acquisitions in the future.
 
Acquisitions
involve a number of risks, including, but not limited to:
 


 
●
the
    potential failure to achieve the expected benefits of the acquisition, including the inability to generate sufficient revenue to
    offset acquisition costs, or the inability to achieve expected synergies or cost savings;

 
 
 

 
●
unanticipated
    expenses related to acquired businesses or technologies and their integration into our existing businesses or technology;

 
 
 

 
●
the
    diversion of financial, managerial and other resources from existing operations;

 
 
 

 
●
the
    risks of entering into new markets in which we have little or no experience or where competitors may have stronger positions;

 
 
 

 
●
potential
    write-offs or amortization of acquired assets or investments;

 
 
 

 
●
the
    potential loss of key employees, clients or partners of an acquired business;

 
 
 

 
●
delays
    in client purchases due to uncertainty related to any acquisition;

 
 
 

 
●
potential
    unknown liabilities associated with an acquisition; and

 
 
 

 
●
the
    tax effects of any such acquisitions.

 
If
we fail to successfully integrate acquired businesses or fail to implement our business strategies with respect to acquisitions, we may
not be able to achieve projected results or support the amount of consideration paid for such acquired businesses, which could have an
adverse effect on our business and financial condition.
 

10
 


 
Finally,
if we finance acquisitions by issuing equity or convertible or other debt securities, our existing stockholders may be diluted, or we
could face constraints related to the terms of and repayment obligations related to the incurrence of indebtedness. This could adversely
affect the market price of our securities.
 
We
could consume resources in researching acquisitions, business opportunities or financings and capital market transactions that are not
ultimately consummated, which could materially adversely affect our financial condition and subsequent attempts to locate and acquire
or invest in another business.
 
We
anticipate that the investigation of each specific acquisition or business opportunity and the negotiation, drafting, and execution of
relevant agreements, disclosure documents, and other instruments with respect to such transaction will require substantial management
time and attention and substantial costs for financial advisors, accountants, attorneys and other advisors. If a decision is made not
to consummate a specific acquisition, business opportunity or financing and capital market transaction, the costs incurred up to that
point for the proposed transaction likely would not be recoverable. Furthermore, even if an agreement is reached relating to a specific
acquisition, investment target or financing, we may fail to consummate the investment or acquisition for any number of reasons, including
those beyond our control. Any such event could consume significant management time and result in a loss to us of the related costs incurred,
which could adversely affect our financial position and our ability to consummate other acquisitions and investments.
 
A
significant increase in new SaaS contracts could require a significant cash outlay, which could adversely affect near term cash flow.
 
If
new or existing clients purchase significant amounts of our SaaS services, we may have to expend a significant amount of initial setup
costs and time before those new clients are able to begin using such services, and we cannot begin to recognize revenues from those SaaS
agreements until the commencement of such services. Accordingly, we anticipate that our near-term cash flow may be adversely affected
by significant incremental setup costs from new SaaS clients that would not be offset by revenue until new SaaS clients go into production.
While we anticipate long-term growth in profitability through increases in recurring SaaS subscription fees and significantly improved
profit visibility, any inability to adequately finance setup costs for new SaaS solutions could result in the failure to put new SaaS
solutions into production and could have a material adverse effect on our liquidity, financial position and results of operations. In
addition, this near-term cash flow demand could adversely impact our financial flexibility and cause us to forego otherwise attractive
business opportunities or investments.
 
We
may not see the anticipated market interest or growth in our software solutions. In addition, coding audit services and associated software
and technologies represent a new market for the Company, and we may not see the anticipated market interest or growth due to being a
new player in the industry.
 
The
Company is currently investing in the eValuator platform as well as new software-based technologies relating to high automation and machine-based
analytics regarding a client’s coding audit process. The return on this investment requires that the product developments continue
to be defined and completed in a timely and cost-effective manner, there remains general interest in the marketplace (for both existing
and future clients) for this technology, the demand for the product generates sufficient revenue in light of the development costs and
that the Company is able to execute a successful product launch for these technologies. If the Company is unable to meet these requirements
when launching these technologies, or if there is a delay in the launch process, the Company may not see an increase in revenue to offset
the current development costs or otherwise translate to added growth and revenue for the Company.
 

11
 

 
Clients
may exercise termination rights within their contracts, which may cause uncertainty in anticipated and future revenue streams.
 
The
Company generally does not allow for termination of a client’s agreement except at the end of the agreed upon term or for cause.
However, certain of the Company’s client contracts provide that the client may terminate the contract without cause prior to the
end of the term of the agreement by providing written notice, sometimes with relatively short notice periods. In the third quarter of
fiscal 2023, a client who accounted for approximately $4.4 million, or 19%, of our revenue for fiscal 2023, and
$4.2 million, or 17%, of our revenue for fiscal 2022, terminated its contract with the Company, effective December
31, 2023. The Company also provides trial or evaluation periods for certain clients, especially for new products and services. Furthermore,
there can be no assurance that a client will not cancel all or any portion of an agreement, even without an express early termination
right, and the Company may face additional costs or hardships collecting on amounts owed if a client terminates an agreement without
such a right. Whether resulting from termination for cause or the limited termination for convenience rights discussed above, the existence
of contractual relationships with these clients is not an assurance that we will continue to provide services for our clients through
the entire term of their respective agreements. If clients representing a significant portion of our revenue terminated their agreements
unexpectedly, we may not, in the short-term, be able to replace the revenue and income from such contracts and this would have a material
adverse effect on the Company’s business, financial condition, results of operations and cash flows. In addition, client contract
terminations could harm our reputation within the industry, especially any termination for cause, which could negatively impact our ability
to obtain new clients.
 
Changes
in healthcare regulations impacting coding, payers and other aspects of the healthcare regulatory cycle could have substantial impact
on our financial performance, growth and operating costs.
 
Our
sales and profitability depend, in part, on the extent to which coverage of and reimbursement for medical care provided is available
from governmental health programs, private health insurers, managed care plans and other third-party payors. Unanticipated regulatory
changes could materially impact the need for and/or value of our solutions. For example, if governmental or other third-party payors
materially reduce reimbursement rates or fail to reimburse our clients adequately, our clients may suffer adverse financial consequences.
Changes in regulations affecting the healthcare industry, such as any increased regulation by governmental agencies of the purchase and
sale of medical products, or restrictions on permissible discounts and other financial arrangements, could also directly impact the capabilities
our solutions and services provide and the pricing arrangements we are required to offer to be competitive in the market. Similarly,
the U.S. Congress may adopt legislation that may change, override, conflict with or pre-empt the currently existing regulations and which
could restrict the ability of clients to obtain, use or disseminate patient health information and/or impact the value of the functionality
our products and services provide.
 
These
situations would, in turn, reduce the demand for our solutions or services and/or the ability for a client to purchase our solutions
or services. This could have a material impact on our financial performance. In addition, the speed with which the Company can respond
to and address any such changes when compared with the response of other companies in the same market (especially companies who may accurately
anticipate the evolving healthcare industry structure and identify unmet needs) are important competitive factors. If the Company is
not able to address the modifications in a timely manner compared with our competition, that may further reduce demand for our solutions
and services.
 
The
potential impact on us of new or changes in existing federal, state and local regulations governing healthcare information could be substantial.
 
Healthcare
regulations issued to date have not had a material adverse effect on our business. However, we cannot predict the potential impact of
new or revised regulations that have not yet been released or made final, or any other regulations that might be adopted. The U.S. Congress
may adopt legislation that may change, override, conflict with or pre-empt the currently existing regulations and which could restrict
the ability of clients to obtain, use or disseminate patient health information. Although the features and architecture of our existing
solutions can be modified, it may be difficult to address the changing regulation of healthcare information.
 

12
 

 
The
healthcare industry is highly regulated. Any material changes in the political, economic or regulatory healthcare environment that affect
the group purchasing business or the purchasing practices and operations of healthcare organizations, or that lead to consolidation in
the healthcare industry, could require us to modify our services or reduce the funds available to providers to purchase our solutions
and services.
 
Our
business, financial condition and results of operations depend upon conditions affecting the healthcare industry generally and hospitals
and health systems particularly. Our ability to grow will depend upon the economic environment of the healthcare industry, as well as
our ability to increase the number of solutions that we sell to our clients. The healthcare industry is highly regulated and is subject
to changing political, economic and regulatory influences. Factors such as changes in reimbursement policies for healthcare expenses,
consolidation in the healthcare industry, regulation, litigation and general economic conditions affect the purchasing practices, operation
and, ultimately, the operating funds of healthcare organizations. In particular, changes in regulations affecting the healthcare industry,
such as any increased regulation by governmental agencies of the purchase and sale of medical products, or restrictions on permissible
discounts and other financial arrangements, could require us to make unplanned modifications to our solutions and services, or result
in delays or cancellations of orders or reduce funds and demand for our solutions and services.
 
Our
clients derive a substantial portion of their revenue from third-party private and governmental payors, including through Medicare, Medicaid
and other government-sponsored programs. Our sales and profitability depend, in part, on the extent to which coverage of and reimbursement
for medical care provided is available from governmental health programs, private health insurers, managed care plans and other third-party
payors. If governmental or other third-party payors materially reduce reimbursement rates or fail to reimburse our clients adequately,
our clients may suffer adverse financial consequences, which in turn, may reduce the demand for and ability to purchase our solutions
or services.
 
We
face significant competition, including from companies with significantly greater resources.
 
We
currently compete with many other companies for the licensing of similar software solutions and related services. Several companies
historically have dominated the clinical information systems software market and several of these companies have either acquired,
developed, or are developing their own analytics and coding/clinical documentation improvement solutions, as well as the resultant
workflow technologies. The industry is undergoing consolidation and realignment as companies position themselves to compete more
effectively. Many of these companies are larger than us and have significantly more resources to invest in their business. In
addition, information and document management companies serving other industries may enter the market. Suppliers and companies with
whom we may establish strategic alliances also may compete with us. Such companies and vendors may either individually, or by
forming alliances excluding us, place bids for large agreements in competition with us. A decision on the part of any of these
competitors to focus additional resources in any of our solution focuses (charge reconciliation, coding audit solutions, analytics
and coding/clinical documentation improvement), workflow technologies and other markets addressed by us could have a material
adverse effect on us.
 
The
healthcare industry is evolving rapidly, which may make it more difficult for us to be competitive in the future.
 
The
U.S. healthcare system is under intense pressure to improve in many areas, including modernization, universal access and controlling
skyrocketing costs of care. We believe that the principal competitive factors in our market are client recommendations and references,
company reputation, system reliability, system features and functionality (including ease of use), technological advancements, client
service and support, breadth and quality of the systems, the potential for enhancements and future compatible solutions, the effectiveness
of marketing and sales efforts, price and the size and perceived financial stability of the vendor. In addition, we believe that the
speed with which companies in our market can anticipate the evolving healthcare industry structure and identify unmet needs is an important
competitive factor. If we are unable to keep pace with changing conditions and new developments, we will not be able to compete successfully
in the future against existing or potential competitors.
 

13
 

 
Rapid
technology changes and short product life cycles could harm our business.
 
The
market for our solutions and services is characterized by rapidly changing technologies, regulatory requirements, evolving industry standards
and new product introductions and enhancements that may render existing solutions obsolete or less competitive. As a result, our position
in the healthcare information technology market could change rapidly due to unforeseen changes in the features and functions of competing
products, as well as the pricing models for such products. Our future success will depend, in part, upon our ability to enhance our existing
solutions and services and to develop and introduce new solutions and services to meet changing requirements. Moreover, competitors may
develop competitive products that could adversely affect our operating results. We need to maintain an ongoing research and development
program to continue to develop new solutions and apply new technologies to our existing solutions but may not have sufficient funds with
which to undertake such required research and development. If we are not able to foresee changes or to react in a timely manner to such
developments, we may experience a material, adverse impact on our business, operating results and financial condition.
 
Our
intellectual property rights are valuable, and any inability to protect them could reduce the value of our solutions and services.
 
Our
intellectual property, which represents an important asset to us, has some protection against infringement through copyright and trademark
law. We generally have little patent protection on our software. We rely upon license agreements, employment agreements, confidentiality
agreements, nondisclosure agreements and similar agreements to maintain the confidentiality of our proprietary information and trade
secrets. Notwithstanding these precautions, others may copy, reverse engineer or independently design technology similar to our solutions.
If we fail to protect adequately our intellectual property through trademarks and copyrights, license agreements, employment agreements,
confidentiality agreements, nondisclosure agreements or similar agreements, our intellectual property rights may be misappropriated by
others, invalidated or challenged, and our competitors could duplicate our technology or may otherwise limit any competitive technology
advantage we may have. It may be necessary to litigate to enforce or defend our proprietary technology or to determine the validity of
the intellectual property rights of others. Any litigation, successful or unsuccessful, may result in substantial cost and require significant
attention by management and technical personnel.
 
Due
to the rapid pace of technological change, we believe our future success is likely to depend upon continued innovation, technical expertise,
marketing skills and client support and services rather than on legal protection of our intellectual property rights. However, we have
aggressively asserted our intellectual property rights when necessary and intend to do so in the future.
 
We
could be subjected to claims of intellectual property infringement that could be expensive to defend.
 
While
we do not believe that our solutions and services infringe upon the intellectual property rights of third parties, the potential for
intellectual property infringement claims continually increases as the number of software patents and copyrighted and trademarked materials
continues to rapidly expand. Any claim for intellectual property right infringement, even if not meritorious, could be expensive to defend.
If we were held liable for infringing third party intellectual property rights, we could incur substantial damage awards, and potentially
be required to cease using the technology, produce non-infringing technology or obtain a license to use such technology. Such potential
liabilities or increased costs could be material to us.
 
If
we are unable to maintain effective internal control over financial reporting, we may fail to prevent or detect material misstatements
in our financial statements, in which case investors may lose confidence in the accuracy and completeness of our financial statements.
 
In
connection with the preparation of the consolidated financial statements for each of our fiscal years, our management conducts a review
of our internal control over financial reporting. We are also required to maintain effective disclosure controls and procedures. Any
failure to maintain adequate controls or to adequately implement required new or improved controls could harm operating results, or cause
failure to meet reporting obligations in a timely and accurate manner.
 

14
 

 
Third
party products are essential to our software.
 
Our
software incorporates software licensed from various vendors into our proprietary software. In addition, third-party, stand-alone software
is required to operate some of our proprietary software modules. The loss of the ability to use these third-party products, or ability
to obtain substitute third-party software at comparable prices, could have a material adverse effect on our ability to license our software.
 
Our
solutions may not be error-free and could result in claims of breach of contract and liabilities.
 
Our
solutions are very complex and may not be error-free, especially when first released. Although we perform extensive testing, failure
of any solution to operate in accordance with its specifications and documentation could constitute a breach of the license agreement
and require us to correct the deficiency. If such deficiency is not corrected within the agreed-upon contractual limitations on liability
and cannot be corrected in a timely manner, it could constitute a material breach of a contract allowing the termination thereof and
possibly subjecting us to liability. Also, we sometimes indemnify our clients against third-party infringement claims. If such claims
are made, even if they are without merit, they could be expensive to defend. Our license and SaaS agreements generally limit our liability
arising from these types of claims, but such limits may not be enforceable in some jurisdictions or under some circumstances. A significant
uninsured or under-insured judgment against us could have a material adverse impact on us.
 
We
could be liable to third parties from the use of our solutions.
 
Our
solutions provide access to patient information used by physicians and other medical personnel in providing medical care. The medical
care provided by physicians and other medical personnel are subject to numerous medical malpractice and other claims. We attempt to limit
any potential liability of ours to clients by limiting the warranties on our solutions in our agreements with our clients (i.e., healthcare
providers). However, such agreements do not protect us from third-party claims by patients who may seek damages from any or all persons
or entities connected to the process of delivering patient care. We maintain insurance, which provides limited protection from such claims,
if such claims result in liability to us. Although no such claims have been brought against us to date regarding injuries related to
the use of our solutions, such claims may be made in the future. A significant uninsured or under-insured judgment against us could have
a material adverse impact on us.
 
Our
SaaS and support services could experience interruptions.
 
We
provide SaaS for many clients, including the storage of critical patient, financial and administrative data. In addition, we provide
support services to clients through our client support organization. We have redundancies, such as backup generators, redundant telecommunications
lines and backup facilities built into our operations to prevent disruptions. However, complete failure of all generators, impairment
of all telecommunications lines or severe casualty damage to the primary building or equipment inside the primary building housing our
hosting center or client support facilities could cause a temporary disruption in operations and adversely affect clients who depend
on the application hosting services. Any interruption in operations at our data center or client support facility could cause us to lose
existing clients, impede our ability to obtain new clients, result in revenue loss, cause potential liability to our clients, and increase
our operating costs.
 
Our
business and operations would suffer in the event of computer system failures, cyber-attacks or a deficiency in our cybersecurity. Our
SaaS solutions are provided over an internet connection and any breach of security or confidentiality of protected health information
could expose us to significant expense and harm our reputation.
 
Despite
the implementation of security measures, our internal computer systems, and those of third parties on which we rely, are vulnerable to
damage from a variety of causes, including computer viruses, malware, intentional or accidental mistakes or errors by users with authorized
access to our computer systems, natural disasters, terrorism, war, telecommunication and electrical failures, cyber-attacks or cyber-intrusions
over the Internet, or attachments to emails. The risk of a security breach or disruption, particularly through cyber-attacks or cyber
intrusions, including by computer hackers, non-U.S. governments, extra-state actors and cyber terrorists, has generally increased as
the number, intensity and sophistication of attempted attacks and intrusions from around the world have increased.
 

15
 

 
We
provide remote SaaS solutions for clients, including the storage of critical patient, financial and administrative data. We have security
measures in place to prevent or detect misappropriation of protected health information. We must maintain facility and systems security
measures to preserve the confidentiality of data belonging to clients, as well as their patients, that resides on computer equipment
in our data center, which we handle via application hosting services, or that is otherwise in our possession. Notwithstanding efforts
undertaken to protect data, it can be vulnerable to infiltration as well as unintentional lapse. If any disruption or security breach
was to result in a loss of or damage to our data or applications, or inappropriate disclosure of confidential or proprietary information,
we could face claims for contract breach, penalties and other liabilities for violation of applicable laws or regulations, significant
costs for remediation and re-engineering to prevent future occurrences and serious harm to our reputation.
 
In
the current environment, there are numerous and evolving risks to cybersecurity and privacy, including criminal hackers, hacktivists,
state-sponsored intrusions, industrial espionage, employee malfeasance and human or technological error. High-profile security breaches
at other companies and in government agencies have increased in recent years, and security industry experts and government officials
have warned about the risks of hackers and cyber-attacks targeting businesses such as ours. Computer hackers and others routinely attempt
to breach the security of technology products, services and systems, and to fraudulently induce employees, clients, or others to disclose
information or unwittingly provide access to systems or data. We can provide no assurance that our current IT systems, software, or third-party
services, or any updates or upgrades thereto will be fully protected against third-party intrusions, viruses, hacker attacks, information
or data theft or other similar threats.
 
Legislative
or regulatory action in these areas is also evolving, and we may be unable to adapt our IT systems to accommodate these changes. We have
experienced and expect to continue to experience sophisticated attempted cyber-attacks of our IT networks. Although none of these attempted
cyber-attacks has had a material adverse impact on our operations or financial condition, we cannot guarantee that any such incidents
will not have such an impact in the future.
 
The
loss of key personnel could adversely affect our business.
 
Our
success depends, to a significant degree, on our management, sales force and technical personnel. We must recruit, motivate and retain
highly skilled managers, sales, consulting and technical personnel, including solution programmers, database specialists, consultants
and system architects who have the requisite expertise in the technical environments in which our solutions operate. Competition for
such technical expertise is intense. Our failure to attract and retain qualified personnel could have a material adverse effect on us.
 
Our
future success depends upon our ability to grow, and if we are unable to manage our growth effectively, we may incur unexpected expenses
and be unable to meet our clients’ requirements.
 
We
will need to expand our operations if we successfully achieve greater demand for our products and services. We cannot be certain that
our systems, procedures, controls and human resources will be adequate to support expansion of our operations. Our future operating results
will depend on the ability of our officers and employees to manage changing business conditions and to implement and improve our technical,
administrative, financial control and reporting systems. We may not be able to expand and upgrade our systems and infrastructure to accommodate
these increases. Difficulties in managing any future growth, including as a result of integrating any prior or future acquisition with
our existing businesses, could cause us to incur unexpected expenses or render us unable to meet our clients’ requirements, and
consequently have a significant negative impact on our business, financial condition and operating results.
 

16
 

 
We
may not have access to sufficient or cost-efficient capital to support our growth, execute our business plans and remain competitive
in our markets.
 
As
our operations grow and as we implement our business strategies, we expect to use both internal and external sources of capital. In addition
to cash flow from normal operations, we may need additional capital in the form of debt or equity to operate and support our growth,
execute our business plans and remain competitive in our markets. We may have no or limited availability to such external capital, in
which case our future prospects may be materially impaired. Furthermore, we may not be able to access external sources of capital on
reasonable or favorable terms. Our business operations could be subject to both financial and operational covenants that may limit the
activities we may undertake, even if we believe they would benefit the Company. While we believe our existing sources of liquidity will
provide sufficient resources to meet our current working capital and cash requirements, if we require an increase in capital to meet
our future business needs or if we are unable to comply with covenants under our credit facilities, such capital may not be available
to us on terms acceptable to us, or at all.
 
Unstable
market and economic conditions and potential disruptions in the credit markets may adversely affect our business, including the availability
and cost of short-term funds for liquidity requirements and our ability to meet long-term commitments, which could adversely affect our
results of operations, cash flows and financial condition.
 
If
internally generated funds are not available from operations, we may be required to rely on the banking and credit markets to meet our
financial commitments and short-term liquidity needs. Our access to funds under our revolving credit facility or pursuant to arrangements
with other financial institutions is dependent on the financial institution’s ability to meet funding commitments. Financial institutions
may not be able to meet their funding commitments if they experience shortages of capital and liquidity or if they experience high volumes
of borrowing requests from other borrowers within a short period of time.
 
Global
credit and financial markets have recently, and may continue to, experience extreme volatility and disruptions, including severely diminished
liquidity and credit availability, declines in consumer confidence, declines in economic growth, inflationary pressure and interest rate
changes and uncertainty about economic stability. There can be no assurance that future credit and financial market instability and a
deterioration in confidence in economic conditions will not occur. Our general business strategy may be adversely affected by any such
economic downturn, liquidity shortages, volatile business environment or continued unpredictable and unstable market conditions. If the
equity and credit markets deteriorate, or if adverse developments are experienced by financial institutions, it may cause short-term
liquidity risk and also make any necessary debt or equity financing more difficult, more costly and more dilutive. Failure to secure
any necessary financing in a timely manner and on favorable terms could have a material adverse effect on our growth strategy, financial
performance and stock price and could require us to delay or abandon clinical development plans. In addition, there is a risk that one
or more of our current service providers, financial institutions, manufacturers and other partners may be adversely affected by the foregoing
risks, which could directly affect our ability to attain our operating goals on schedule and on budget.  
 

17
 

 
We
must maintain compliance with the terms of our existing credit facilities or receive a waiver for any non-compliance. The failure to
maintain compliance could have a material adverse effect on our ability to finance our ongoing operations and we may not be able to find
an alternative lending source if a default occurs.
 
We
have a credit facility with Western Alliance Bank (“WAB”) pursuant that certain Second Amended and Restated Loan and Security
Agreement (as amended and modified, the “Loan Agreement”). The Loan Agreement includes (i) a term loan facility with an initial
maximum principal amount of $10,000,000 and (ii) a $2,000,000 revolving line of credit. The Loan Agreement is secured by substantially
all of the assets of the Company, its subsidiaries, and certain of our affiliates.
 
The
Loan Agreement has a five-year term, and the maximum principal amount was advanced in a single-cash advance on or about the closing date.
Interest accrued under the Loan Agreement is due monthly, and the Company is required to make monthly interest-only payments through
the one-year anniversary of the closing date. From the first anniversary of the closing date through the maturity date, the Company is
required to make monthly payments of principal and interest that increase over the term of the agreement. The Loan Agreement requires
principal repayments of $500,000 in the second year, $1,000,000 in the third year, $2,000,000 in the fourth year, and $3,000,000 in the
fifth year, respectively, with the remaining outstanding principal balance and all accrued but unpaid interest due in full on the maturity
date. The Loan Agreement may also require early repayments if certain conditions are met.
 
The
Loan Agreement also includes negative covenants, subject to exceptions, which limit transfers, capital expenditures, indebtedness, certain
liens, investments, acquisitions, dispositions of assets, restricted payments and the business activities of the Company, as well as
customary representations and warranties, affirmative covenants and events of default, including cross defaults and a change of control
default. Specifically, the Loan Agreement requires us to satisfy a Maximum ARR Net Leverage Ratio, Maximum Debt to Adjusted EBITDA Ratio,
and Fixed Charge Coverage Ratio (as such terms are defined in the Loan Agreement) and maintain minimum Adjusted EBITDA on an ongoing
basis, measured at the end of each fiscal quarter. For the period ended January 31, 2024, the Company was not in compliance with certain
financial covenants under the Loan Agreement; however, on February 7, 2024, the Company received a waiver from WAB pursuant to that certain
Third Modification and Waiver (the “Third Modification”) to the Loan Agreement (see Refer to Note 14 – Subsequent Events
to our consolidated financial statements included in Part II, Item 8, “Financial Statements and Supplementary Data” for additional
information regarding the Third Modification.).
 
If
we do not maintain compliance with all of the continuing covenants and other terms and conditions of our existing credit facilities or
secure a waiver for any non-compliance, we could be required to repay outstanding borrowings on an accelerated basis, which could subject
us to decreased liquidity and other negative impacts on our business, results of operations and financial condition. Furthermore, if
we needed to do so, it may be difficult for us to find an alternative lending source. In addition, because our assets are pledged as
a security under our credit facilities, if we are not able to cure any default or repay outstanding borrowings, our assets are subject
to the risk of foreclosure by our lenders. Without a sufficient credit facility, we would be adversely affected by a lack of access to
liquidity needed to operate our business. Any disruption in access to credit could force us to take measures to conserve cash, such as
deferring important research and development expenses, which measures could have a material adverse effect on us.
 

18
 


 
Economic
conditions in the U.S. and globally may have significant effects on our clients and suppliers that could result in material adverse effects
on our business, operating results and stock price.
 
Economic
conditions in the U.S. and globally could deteriorate and cause the worldwide economy to enter into a stagnant period that could materially
adversely affect our clients’ access to capital or willingness to spend capital on our solutions and services or their levels of
cash liquidity with which to pay for solutions that they will order or have already ordered from us. In addition, the ongoing conflict
between Russia and Ukraine could lead to disruption, instability and volatility in global markets and industries that could negatively
impact our operations. The U.S. government, and other governments in jurisdictions in which we operate, have imposed severe sanctions
and export controls against Russia and Russian interests and threatened additional sanctions and controls. The impact of these measures,
as well as potential responses to them by Russia, is currently unknown and they could adversely affect our business, partners or clients.
Challenging economic conditions also would likely negatively impact our business, which could result in: (1) reduced demand for our solutions
and services; (2) increased price competition for our solutions and services; (3) increased risk of collectability of cash from our clients;
(4) increased risk in potential reserves for doubtful accounts and write-offs of accounts receivable; (5) reduced revenues; and (6) higher
operating costs as a percentage of revenues.
 
All
of the foregoing potential consequences of a deterioration of economic conditions are difficult to forecast and mitigate. As a consequence,
our operating results for a particular period are difficult to predict, and, therefore, prior results are not necessarily indicative
of future results. Any of the foregoing effects could have a material adverse effect on our business, results of operations, and financial
condition and could adversely affect the market price of our common stock and other securities.
 
The
variability of our quarterly operating results can be significant.
 
Our
operating results have fluctuated from quarter-to-quarter in the past, and we may experience continued fluctuations in the future. Future
revenues and operating results may vary significantly from quarter-to-quarter as a result of a number of factors, many of which are outside
of our control. These factors include: the relatively large size of client agreements; unpredictability in the number and timing of software
licenses and sales of application hosting services; length of the sales cycle; delays in installations; changes in clients’ financial
conditions or budgets; increased competition; the development and introduction of new products and services; the loss of significant
clients or remarketing partners; changes in government regulations, particularly as they relate to the healthcare industry; the size
and growth of the overall healthcare information technology markets; any liability and other claims that may be asserted against us;
our ability to attract and retain qualified personnel; national and local general economic and market conditions; and other factors discussed
in this Report and our other filings with the SEC.
 

19
 

 
Our
business, results of operations and financial condition has been, and may continue to be, materially adversely affected by the COVID-19
pandemic.
 
The
COVID-19 pandemic, and its attendant economic damage, has had an adverse impact on our revenue and may continue to adversely affect our
business, results of operations and financial condition. These and other potential impacts of COVID-19 may continue to materially and
adversely affect our business, results of operations and financial condition. We may experience adverse impacts to our business as a
result of any economic recession or depression that has occurred or may occur in the future as a result of the COVID-19 pandemic. For
instance, changes in the behavior of customers, businesses and their employees as a result of the COVID-19 pandemic, including social
distancing practices, even after formal restrictions have been lifted, are unknown. Furthermore, the financial condition of our customers
and vendors may be adversely impacted, which may result in a decrease in the demand for our products, the inability and our franchisees’
ability to operate store locations or a disruption to our supply chain. Any of these events may, in turn, have a material adverse impact
our business, results of operations and financial condition.
 
The
preparation of our financial statements requires the use of estimates that may vary from actual results.
 
The
preparation of consolidated financial statements in conformity with U.S. generally accepted accounting principles requires management
to make significant estimates that affect the financial statements. One of our most critical estimates is the capitalization of software
development costs. Due to the inherent nature of these estimates, we may be required to significantly increase or decrease such estimates
upon determination of the actual results. Any required adjustments could have a material adverse effect on us and our results of operations.
 
Failure
to improve and maintain the quality of internal control over financial reporting and disclosure controls and procedures or other lapses
in compliance could materially and adversely affect our ability to provide timely and accurate financial information about us or subject
us to potential liability.
 
In
connection with the preparation of the consolidated financial statements for each of our fiscal years, our management conducts a review
of our internal control over financial reporting. We are also required to maintain effective disclosure controls and procedures. Any
failure to maintain adequate controls or to adequately implement required new or improved controls could harm operating results, or cause
failure to meet reporting obligations in a timely and accurate manner.
 

20
 


 
Risks
Relating to our Common Stock
 
The
market price of our common stock is likely to be highly volatile as the stock market in general can be highly volatile.
 
The
public trading of our common stock is based on many factors that could cause fluctuation in the price of our common stock. These factors
may include, but are not limited to:
 


 
●
General
    economic and market conditions;

 
 
 

 
●
Actual
    or anticipated variations in annual or quarterly operating results;

 
 
 

 
●
Lack
    of or negative research coverage by securities analysts;

 
 
 

 
●
Conditions
    or trends in the healthcare information technology industry;

 
 
 

 
●
Changes
    in the market valuations of other companies in our industry;

 
 
 

 
●
Announcements
    by us or our competitors of significant acquisitions, strategic partnerships, divestitures, joint ventures or other strategic initiatives;

 
 
 

 
●
Announced
    or anticipated capital commitments;

 
 
 

 
●
Ability
    to maintain listing of our common stock on Nasdaq;

 
 
 

 
●
Additions
    or departures of key personnel; and

 
 
 

 
●
Sales
    and repurchases of our common stock by us, our officers and directors or our significant stockholders, if any.

 
Most
of these factors are beyond our control. Further, as a result of our relatively small public float, our common stock may be less liquid,
and the trading price for our common stock may be more affected by relatively small volumes of trading than is the case for the common
stock of companies with a broader public ownership. These factors may cause the market price of our common stock to decline, regardless
of our operating performance or financial condition.
 
If
equity research analysts do not publish research reports about our business or if they issue unfavorable commentary or downgrade our
common stock, the price of our common stock could decline.
 
The
trading market for our common stock may rely in part on the research and reports that equity research analysts publish about our business
and us. We do not control the opinions of these analysts. The price of our stock could decline if one or more equity analysts downgrade
our stock or if those analysts issue other unfavorable commentary or cease publishing reports about our business or us. Furthermore,
if no equity research analysts conduct research or publish reports about our business and us, the market price of our common stock could
decline.
 
All
of our debt obligations and any preferred stock that we may issue in the future will have priority over our common stock with respect
to payment in the event of a bankruptcy, liquidation, dissolution or winding up.
 
In
any bankruptcy, liquidation, dissolution or winding up of the Company, our shares of common stock would rank in right of payment or distribution
below all debt claims against us and all of our outstanding shares of preferred stock, if any. As a result, holders of our shares of
common stock will not be entitled to receive any payment or other distribution of assets in the event of a bankruptcy or upon a liquidation
or dissolution until after all of our obligations to our debt holders and holders of preferred stock have been satisfied. Accordingly,
holders of our common stock may lose their entire investment in the event of a bankruptcy, liquidation, dissolution or winding up of
the Company. Similarly, holders of our preferred stock would rank junior to our debt holders and creditors in the event of a bankruptcy,
liquidation, dissolution or winding up of the Company.
 

21
 

 

There
may be future sales or other dilution of our equity, which may adversely affect the market price of our common stock.
 
As
of January 31, 2024, we had outstanding options and warrants to purchase 67,500 and no shares of the Company’s common
stock, respectively. The exercise of such options and warrants and conversion of convertible securities would dilute the ownership percentages
of our existing stockholders, and any sales in the public market of common stock underlying such securities could adversely affect prevailing
market prices for our common stock. We are generally not restricted from issuing in public or private offerings additional shares of
common stock or preferred stock, and other securities that are convertible into or exchangeable for, or that represent a right to receive,
common stock or preferred stock or any substantially similar securities. Such offerings represent the potential for a significant increase
in the number of outstanding shares of our common stock. The market price of our common stock could decline as a result of sales of common
stock, preferred stock or similar securities in the market made after an offering or the perception that such sales could occur.
 
The
issuance of preferred stock could adversely affect holders of shares of our common stock, which may negatively impact your investment.
 
Our
Board of Directors is authorized to issue classes or series of preferred stock without any action on the part of the stockholders. The
Board of Directors also has the power, without stockholder approval, to set the terms of any such classes or series of preferred stock
that may be issued, including rights and preferences over the shares of common stock with respect to dividends or upon our dissolution,
winding-up or liquidation, and other terms. If we issue preferred stock in the future that has a preference over the shares of our common
stock with respect to the payment of dividends or upon our dissolution, winding up or liquidation, or if we issue preferred stock with
voting rights that dilute the voting power of the shares of our common stock, the rights of the holders of shares of our common stock
or the market price of our common stock could be adversely affected.
 
As
of January 31, 2024, we had no shares of preferred stock outstanding.
 
We
do not currently intend to pay dividends on our common stock and, consequently, your ability to achieve a return on your investment will
depend solely on appreciation in the price of our common stock.
 
We
have never declared or paid any cash dividends on our common stock and do not currently intend to do so for the foreseeable future. We
currently intend to invest our future earnings, if any, to fund our growth. Therefore, you are not likely to receive any dividends on
your common stock for the foreseeable future and the success of an investment in shares of our common stock will depend upon any future
appreciation in its value. The trading price of our common stock could decline and you could lose all or part of your investment.
 
Sales
of shares of our common stock or securities convertible into our common stock in the public market may cause the market price of our
common stock to fall.
 
The
issuance of shares of our common stock or securities convertible into our common stock in an offering from time to time could have the
effect of depressing the market price for shares of our common stock. In addition, because our common stock is thinly traded, resales
of shares of our common stock by our largest stockholders or insiders could have the effect of depressing market prices for our common
stock.
 
If
we are unable to maintain compliance with Nasdaq listing requirements, our stock could be delisted, and the trading price, volume and
marketability of our stock could be adversely affected.
 
Our
common stock is listed on The Nasdaq Capital Market. To maintain listing on The Nasdaq Capital Market, we must satisfy minimum financial
and other continued listing requirements and standards, including the Minimum Bid Price Requirement (as discussed below) and those regarding
director independence and independent committee requirements, minimum stockholders’ equity, and certain corporate governance requirements.
 
We
are required to maintain a minimum bid price of $1.00 per share. On October 24, 2023, we received a letter from the Listing Qualifications
Department (the “Staff”) of the Nasdaq Stock Market indicating that the closing bid price of our common stock had been below
the minimum bid price of $1.00 per share for the previous 30 consecutive business days, which is required for continued listing on The
Nasdaq Capital Market pursuant to Nasdaq Listing Rule 5550(a)(2) (the “Minimum Bid Price Requirement”).
 

22
 


 
In
accordance with Nasdaq Listing Rule 5810(c)(3)(A), Nasdaq has provided the Company with 180 calendar days, or until April 22, 2024, to
regain compliance with the Minimum Bid Price Requirement. During this period, our common stock will continue to trade uninterrupted on
The Nasdaq Capital Market under the symbol “STRM.” To regain compliance, the closing bid price of our common stock must be
at least $1.00 for a minimum of 10 consecutive business days at any time before April 22, 2024. If by April 22, 2024, the Company cannot
demonstrate compliance with the Minimum Bid Price Requirement, it may be eligible for additional time, subject to meeting the continued
listing requirements for The Nasdaq Capital Market, with the exception of the Minimum Bid Price Requirement. If the Company meets these
requirements, we will have an additional 180 calendar days to comply with the Minimum Bid Price Requirement to maintain the listing of
our common stock on The Nasdaq Capital Market. If we are not eligible for the second compliance period, the Staff will provide notice
that our common stock will be subject to delisting, which determination may be appealed to the Nasdaq Hearings Panel.
 
There
can be no assurance that the Company will be able to regain compliance with the Minimum Bid Price Requirement, even if we maintain compliance
with the other listing requirements. In the event that our common stock is delisted from The Nasdaq Capital Market and is not eligible
for quotation or listing on another market or exchange, trading of our common stock could be conducted only in the over-the-counter market
or on an electronic bulletin board established for unlisted securities such as the Pink Sheets or the OTC Bulletin Board. In such event,
it could become more difficult to dispose of, or obtain accurate price quotations for, our common stock, and there would likely also
be a reduction in our coverage by securities analysts and the news media, which could cause the price of our common stock to decline
further. Also, it may be difficult for us to raise additional capital if we are not listed on a major exchange.
 
Such
a delisting would also likely have a negative effect on the price of our common stock and would impair your ability to sell or purchase
our common stock when you wish to do so. In the event of a delisting, we may take actions to restore our compliance with The Nasdaq Stock
Market’s listing requirements, but we can provide no assurance that any such action taken by us would allow our common stock to
become listed again, stabilize the market price or improve the liquidity of our common stock, prevent our common stock from dropping
below the Minimum Bid Price Requirement or prevent future non-compliance with The Nasdaq Stock Market’s listing requirements.
 

23
 

 

Note
Regarding Risk Factors
 
The
risk factors presented above are all of the ones that we currently consider material. However, they are not the only ones facing the
Company. Additional risks not presently known to us, or which we currently consider immaterial, may also adversely affect us. There may
be risks that a particular investor views differently from us, and our analysis might be wrong. If any of the risks that we face actually
occur, our business, financial condition and operating results could be materially adversely affected and could differ materially from
any possible results suggested by any forward-looking statements that we have made or might make. In such case, the market price of our
common stock or other securities could decline and you could lose all or part of your investment. We expressly disclaim any obligation
to update or revise any forward-looking statements, whether as a result of new information, future events or otherwise, except as required
by law.
 
Item
1B. Unresolved Staff Comments
 
None.
 
Item
1C. Cybersecurity 
 
Risk
Management and Strategy
 
We
recognize the critical importance of developing, implementing, and maintaining robust cybersecurity measures to maintain the security,
confidentiality, integrity, and availability of our business systems and confidential information, including personal information and
intellectual property.
 
Our
cybersecurity program includes systems and processes for assessing, identifying and managing material risks from cybersecurity
threats and include maintenance and monitoring of information security policies aligned with information technology controls; user
and employee awareness of cybersecurity policies and practices; information systems configuration management; and infrastructure
security systems. Management makes concerted efforts to select third-party software providers with a demonstrated track-record of
effectively addressing cybersecurity concerns. In event of a cybersecurity incident, we would rely upon these providers. We have
developed and implemented cybersecurity and data privacy processes and procedures that are informed by recognized cybersecurity
frameworks and standards, including Microsoft Azure CSPM and SOC 2. We
use this framework, together with information collected from periodic manual assessments and automated testing, to tailor aspects of
our cybersecurity practices given the nature of our assets, operations and business.
 
The
members of our information technology team actively monitor threats to the information technology environment and work with our
third-party service providers to monitory cybersecurity threats. In light of the Company’s current size and limited personnel, management believes relying on experienced third-party providers is the most prudent and cost-effective
course.
 
As
of the date of this Annual Report, there have been no cybersecurity threats that have materially affected or are reasonably likely to
materially affect our business, operations, or financial condition. For more information on how cybersecurity risk could materially affect
our company’s business strategy, results of operations, or financial condition, please refer to the “Risk Factors”
section of this Annual Report.
 
Governance
 
Cybersecurity
is an important part of our risk management processes and an area of focus for our Board of Directors and management. Our Board of Directors
is responsible for general cybersecurity risk oversight and stays informed on data privacy and information security issues and vulnerabilities
that may be applicable to the Company. Our Board of Directors reviews and evaluates management’s evaluation and mitigation of cybersecurity
risks as part of its oversight of the Company’s risk management program. Management periodically reviews cybersecurity risks and
risk mitigation plans and activities with the Board of Directors. We outsource most aspects of our information technology management
and these third-party providers are available to address any cybersecurity issues that may arise.
 

24
 


 
Item
2. Properties
 
In
March 2020, the Company moved its principal offices to a subleased office space at 11800 Amber Park Drive, Suite 125, Alpharetta, Georgia
30009. The office space totals 7,409 square feet and the sublease expired on March 31, 2023. In October 2021, we subleased this space
to a third party for the remaining lease period.
 
On
August 16, 2021, contemporaneous with the acquisition of Avelead, the Company assumed a lease of office space at 1172 Satellite Boulevard
NW, Office Suite 100, Suwannee, Georgia 30024. The lease expired on February 28, 2022. The lease was renewed in February 2022 for one
year on substantially the same terms. The tenant of the lease is an entity controlled by the former owner of Avelead and former Chief
Strategy Officer of the Company. The lease expired on February 28, 2023 and was not renewed.
 
Prior
to occupying the subleased office space located in Alpharetta, Georgia, the Company occupied shared office space under a membership agreement
which provides for membership fees based on the number of contracted seats.
 
The
Company has moved to a virtual office model and does not have a physical office space. Membership agreements and daily space rentals
are leveraged by the Company when groups need to meet in person. Our mailing address is 2400 Old Milton Pkwy, Box 1353, Alpharetta, GA
30009. We believe the virtual environment is adequate for the Company’s current and planned future operations. Suitable alternative
space is available to accommodate expansion of the Company’s operations.
 
Item
3. Legal Proceedings
 
We
are, from time to time, a party to various legal proceedings and claims, which arise in the ordinary course of business. We are not aware
of any legal matters that could have a material adverse effect on our consolidated results of operations, financial position or cash
flows.
 
Item
4. Mine Safety Disclosures
 
Not
applicable.
 

25
 


 
PART
II
 
Item
5. Market For Registrant’s Common Equity, Related Stockholder Matters and Issuer Purchases of Equity Securities
 
The
Company’s common stock trades on the NASDAQ Capital Market under the symbol STRM.
 
According
to the Company’s stock transfer agent’s records, the Company had 215 stockholders of record as of April 29, 2024.
Because brokers and other institutions on behalf of stockholders hold many of such shares, the Company is unable to determine with complete
accuracy the current total number of stockholders represented by these record holders. The Company estimates that it has approximately
2,728 stockholders, based on information provided by Broadridge Financial Solutions.
 
The
Company has never declared or paid any cash dividends on its common stock and does not currently intend to do so for the foreseeable
future. The Company currently intends to invest its future earnings, if any, to fund its growth.
 
For
the fiscal year ended January 31, 2024, we issued an aggregate of 459,117 shares of common stock to 180 Consulting (as defined below)
as compensation for services provided pursuant to the Master Services Agreement, effective March 19, 2020, by and between the Company
and 180 Consulting and related statements of work. The shares were issued in reliance on the exemption
from registration available under Section 4(a)(2) of the Securities Act and the certificates
representing such shares have a legend imprinted on them stating that the shares have not been registered under the Securities Act and
cannot be transferred until properly registered under the Securities Act or pursuant to an exemption from such registration. 
 
180
Consulting has earned, cumulatively, through the Master Services Agreement, 1,479,911 shares of common stock through January 31, 2024.
206,517 shares of common stock were earned but not issued as of the end of our fiscal year ended January 31, 2024. In June 2023, the
Company filed a Registration Statement on Form S-3 to register 394,127 shares of common stock that were previously issued to 180 Consulting
pursuant to Rule 416 of the Securities Act of 1933. See Note 12 – Commitments and Contingencies to our consolidated financial
statements included in Part II, Item 8, “Financial Statements and Supplementary Data”.
 
The
following table sets forth information with respect to our repurchases of common stock during the three months ended January 31,
2024:
 


  
Total Number of Shares Purchased (1)  
Average Price Paid per Share  
Total Number of Shares Purchased as Part of Publicly Announced Plans or Programs  
Maximum Number of Shares that May Yet Be Purchased under the Plans or Programs 

November 1 - November 30 
 14,529  
$0.43  
 —  
 — 

December 1 - December 31 
 —  
 —  
 —  
 — 

January 1 - January 31 
 —  
 —  
 —  
 — 

Total 
 14,529  
$0.43  
 —  
 — 

 


(1)
    
Amount
    represents shares surrendered by employees to satisfy tax withholding obligations resulting from restricted stock that vested during
    the three months ended January 31, 2024.

 
Item
6. [Reserved]
 

26
 


 
Item
7. Management’s Discussion and Analysis of Financial Condition and Results of Operations
 
Executive
Overview
 
The
Company has identified its primary role as aiding healthcare providers to enhance their revenue cycle management by concentrating on
the intermediary stages of the revenue cycle, specifically from initial charge capture to bill drop. This strategic focus remains consistent
as the Company continues to prioritize initiatives within this segment. Our clients predominantly consist of acute-care hospital systems and
their affiliated clinics.
 
Our
commitment to this segment is underscored by our two flagship software solutions: RevID and eValuator. The Company is dedicated to
spearheading an industry-wide effort aimed at improving the financial performance of healthcare providers by shifting billing
interventions upstream to enhance coding accuracy. As a result of our solutions, clients have reduced revenue leakage, mitigated
risks of under-billing and over-billing, and reduced both denials and accounts receivable turnover.
 
By
focusing on the intermediary stages of the revenue cycle, we believe we offer a distinctive and compelling value proposition that
can help us attract more clients. Through innovation and strategic acquisitions, we have broadened our target markets beyond
inpatient facilities to encompass outpatient centers, clinics, and physician practices. Our suite of revenue cycle solutions,
including eValuator and RevID, is highly competitive, enabling us to secure five significant new clients and our first
enterprise client (using multiple products) in fiscal 2023. These clients represent some of the most renowned names in healthcare,
reflecting our salesforce’s emphasis on industry-leading organizations whose processes often serve as benchmarks for smaller
facilities.
 
On
October 16, 2023, the Company announced it was executing a strategic restructuring designed to reduce expenses while maintaining the
Company’s ability to expand its SaaS business (the “Strategic Restructuring”). The Strategic Restructuring initiatives
included a reduction in force, resulting in the termination of 26 employees, or approximately 24% of the Company’s workforce. To
execute the Strategic Restructuring, the Company recognized one-time restructuring costs associated with the workforce reduction of $759,000,
which consisted of approximately $731,000 in severance and other employee termination-related expenses and approximately $28,000 in incurred
legal fees, in fiscal 2023. The Company expects to realize approximately $5,800,000 in annualized cost savings as a result of the Strategic
Restructuring. Approximately 60% of the expected savings related to the reduction in force were realized during the fourth
quarter of fiscal 2023. The remaining expected cost savings are vendor-related expenses which are expected to be recognized beginning
in the first quarter of fiscal 2024.
 
Acquisitions
 
On
August 16, 2021, the Company completed an acquisition of Avelead, a recognized leader in providing solutions and services to improve
revenue integrity for healthcare providers nationwide. The Company believes Avelead’s solutions will complement and extend the
value the Company can deliver to its clients. Refer to Note 3 – Business Combination in our consolidated financial
statements included in Part I, Item I, “Financial Statements” for further information on the Avelead acquisition.
 
Macro-Economic
Conditions
 
Regardless
of the state of the Affordable Care Act, the healthcare industry continues to face sweeping changes and new standards of care that are
putting greater pressure on healthcare providers to be more efficient in every aspect of their operations. We believe these changes represent
ongoing opportunities for our Company to work with our direct clients and various resellers to provide information technology solutions
to help providers meet these new requirements.
 
The
COVID-19 pandemic, and its attendant economic damage, had an adverse impact on our revenue. Our healthcare clients were
significantly impacted by the pandemic, and continue to struggle with high turnover rates and a challenging labor market in clinical
and administrative departments resulting in a backlog of IT projects. As a result, our market has become highly unpredictable,
diminishing our ability to accurately forecast the timing of sales and implementations.
 

27
 

 
Results
of Operations
 
Statements
of Operations for the fiscal years ended January 31, 2024 and 2023 (in thousands):
 


  
2024  
2023  
$ Change  
% Change      

Software as a Service 
$14,075  
$12,326  
$1,749  
 14%

Maintenance and Support 
 4,318  
 4,483  
 (165) 
 (4)%

Professional fees and licenses 
 4,203  
 8,080  
 (3,877) 
 (48)%

Total revenues 
 22,596  
 24,889  
 (2,293) 
 (9)%

Cost of sales 
 11,053  
 13,395  
 (2,342) 
 (17)%

Selling, general and administrative 
 14,710  
 16,283  
 (1,573) 
 (10)%

Research and development 
 5,704  
 6,042  
 (338) 
 (6)%

Impairment of goodwill 
 9,813  
 —  
 9,813  
 100%

Impairment of long-lived assets 
 963  
 —  
 963  
 100%

Total operating expenses 
 42,243  
 35,720  
 6,523  
 18%

Operating loss 
 (19,647) 
 (10,831) 
 (8,816) 
 81%

Other (expense) income, net 
 904  
 (477) 
 1,381  
 (290)%

Income tax benefit (expense) 
 46  
 (71) 
 117  
 (165)%

Net loss 
$(18,697) 
$(11,379) 
$(7,318) 
 (64)%

Adjusted EBITDA(1) 
$(1,386) 
$(3,757) 
$2,371  
 63%

 


(1)
Non-GAAP
    measure meaning net earnings (loss) before net interest expense, tax (expense) benefit, depreciation, amortization, stock-based compensation
    expense, transactional and other expenses that do not relate to our core operations. See “Use of Non-GAAP Financial Measures”
    below for additional information and reconciliation.

 


28
 

 
The
following table sets forth, for each fiscal year indicated, certain operating data as percentages of total revenues:
 
Statements
of Operations (1)
 


  
Fiscal Year 

  
2023       
2022      

Software as a service 
 62.3% 
 49.5%

Maintenance and support 
 19.1  
 18.0 

Professional fees and licenses 
 18.6  
 32.5 

Total revenues 
 100% 
 100%

Cost of sales 
 48.9% 
 53.8%

Selling, general and administrative 
 65.1  
 65.4 

Research and development 
 25.2  
 24.3 

Impairment of goodwill 
 43.4  
 — 

Impairment of long-lived assets 
 4.3  
 — 

Total operating expenses 
 186.9% 
 143.5%

Operating loss 
 (86.9)% 
 (43.5)%

Other (expense) income, net 
 4.0  
 (1.9)

Income tax benefit (expense) 
 0.2  
 (0.3)

Net loss 
 (82.7)% 
 (45.7)%

  
    
   

Cost of Sales to Revenues ratio, by revenue stream: 
    
   

Software as a service 
 46.7% 
 51.6%

Maintenance and support 
 7.3% 
 9.5%

Professional fees and licenses 
 99.1% 
 81.8%

 


(1)
Because
    a significant percentage of the operating costs are incurred at levels that are not necessarily correlated with revenue levels, a
    variation in the timing of software licenses and installations and the resulting revenue recognition can cause significant variations
    in operating results. As a result, period-to-period comparisons may not be meaningful with respect to the past results nor are they
    necessarily indicative of the future results of the Company in the near or long-term. The data in the table is presented solely for
    the purpose of reflecting the relationship of various operating elements to revenues for the periods indicated.

 
Comparison
of Fiscal 2023 with Fiscal 2022
 
Revenues
 


  
Fiscal Year  
2023 to 2022 Change 

(in thousands): 
2023  
2022  
$  
%      

Software as a service 
$14,075  
$12,326  
$1,749  
 14%

Maintenance and support 
 4,318  
 4,483  
 (165) 
 (4)%

Professional fees and licenses 
 4,203  
 8,080  
 (3,877) 
 (48)%

Total Revenues 
$22,596  
$24,889  
$(2,293) 
 (9)%

 
Software
as a service (SaaS) — Revenues from SaaS are primarily comprised of the Company’s flagship products; eValuator
and RevID. Revenues from SaaS in fiscal 2023 were $14,075,000, as compared to $12,326,000 in fiscal 2022. The $1,749,000 increase in
SaaS revenue was primarily attributable to new client wins, incremental sales to existing clients and recognition of a full year of
revenue from certain clients that implemented our solutions during fiscal 2022, partially offset by client non-renewals. In fiscal 2023, the
Company received notice from a significant SaaS client of its intent not to renew its contract following the expiration of the
current term on December 31, 2023. Fiscal 2023 SaaS revenue reflects losing one month of revenue related to that client. The Company
expects minimal growth in its SaaS business year-over-year but expects sequential growth in each quarter of fiscal 2024 as the
Company replenishes the lost revenue related to the non-renewal of the client contract. At January 31, 2024, the Company had
approximately $3,900,000 in SaaS annual contract value for contracts that has not been implemented.
 

29
 


 
Maintenance
and support — Revenues from maintenance and support are derived from our legacy CDI and Abstracting products. In
fiscal 2023, these revenues were slightly lower as compared to fiscal 2022. $381,000 of the revenue decline was the result of site
terminations and reductions, which was offset by $137,000 of new sales acquired through our channel partner and $78,000 of new
revenue from existing clients related to CPI adjustments. As the Company maintains its focus on SaaS products the Company expects
maintenance and support revenue will continue to decrease in fiscal 2024 as a result of pricing pressure, anticipated non-renewal of contracts and minimal new sales.
 
Professional
fees and licenses — Revenues from professional fees and licenses include proprietary software, term license, professional
services and audit and coding services revenues. Total professional fees and licenses revenues in fiscal 2023 were $4,203,000, a decline of $3,877,000 as compared
to $8,080,000 in fiscal 2022.
 
There
were no perpetual software license revenues recognized in fiscal 2023, as compared to $663,000 in fiscal 2022. The Company has
primarily shifted its business from perpetual software licenses to a SaaS model. Software license sales come primarily from channel partners who were nonproductive in fiscal 2023. As a result of these channel partner relationships the Company has limited
ability to influence sales of these products. Term license revenue for fiscal 2023 decreased $318,000 from fiscal 2022 to a total of
$238,000 due to a term license non-renewal.
 
Professional
services revenues in fiscal 2023 were $1,764,000 as compared to $4,319,000 in fiscal 2022. The decrease in professional services
revenue was attributable to the Company and certain clients choosing at the end of fiscal 2022 to not renew consulting contracts
which accounted for approximately $3,100,000 of professional services revenue in fiscal 2022. The consulting services contracts had
low margins compared to our SaaS solutions and the Company does not intend to pursue such professional services contracts in the
future. The decrease in professional services revenue was partially offset by $700,000 of revenue from new and ongoing
implementation services for  the Company’s RevID solution.
 
Revenues
from audit and coding services in fiscal 2023 were $2,201,000, as compared to $2,542,000 in fiscal 2022. Certain revenue-generating
clients from fiscal 2022 did not require audit services in fiscal 2023 resulting in a decrease of $985,000 in revenue for fiscal
2023 compared to fiscal 2022. Existing clients had various shifts in their demand for audit services that resulted in $554,000 of
incremental revenue for fiscal 2023 compared to fiscal 2022. The Company
believes demand for its onshore, technically proficient coders and auditors in the marketplace is strong and that it has a
competitive edge in providing audit and coding services as an offering with the eValuator solution as a technology-enabled service.
The Company anticipates the audit and coding services business to remain relatively flat in fiscal 2024 to support shifting demand
among clients.
 
Cost
of Revenue
 


  
Fiscal Year  
2023 to 2022 Change 

(in thousands): 
2023  
2022  
$  
%      

Cost of software as a service 
$6,573  
$6,358  
$215  
 3%

Cost of maintenance and support 
 315  
 427  
 (112) 
 (26)%

Cost of professional fees and licenses 
 4,165  
 6,610  
 (2,445) 
 (37)%

Total cost of sales 
$11,053  
$13,395  
$(2,342) 
 (17)%

 
Cost
of software as a service (SaaS) — The Cost of SaaS consists of expenses associated with (i) amortization of
capitalized software, (ii) royalties payable to third-parties for use of their coding related content, and (iii) personnel and
network infrastructure required to deploy and support applications for each client. Expenses related to SaaS increased by
$215,000 in fiscal 2023 compared to fiscal 2022, driven by an increase of $161,000 for fiscal 2023 compared to fiscal 2022 for
amortization of capitalized software features that were put into service during the fiscal year. The Company expects amortization of
capitalized software costs to stay relatively consistent in fiscal 2024 as compared to fiscal 2023.
 

30
 


 
Certain
expenses included in our cost of SaaS are tied to volumes. These expenses include coding tools supporting eValuator and a third-party system
that translates data from the hospital system to the Company’s systems. In fiscal 2023 and 2022, cost of SaaS included non-cash
amortization of capitalized software amounts of $2,229,000 and $2,068,000, respectively. The non-cash amounts impacted fiscal 2023 and 2022 margins by 16% and 17%, respectively. The company expects SaaS
margins will expand as it implements new clients. Certain expenses included in cost of SaaS, such as labor and third-party content providers, negatively impact
gross margin before a client is fully implemented and revenue is recognized.
 
Cost
of maintenance and support – The cost of maintenance and support includes compensation and benefits for client support
personnel required to provide product support for clients on our CDI and Abstracting software licenses. This cost decreased by
approximately $62,000 related to staff augmentation for client support personnel in fiscal 2023 compared
to fiscal 2022. The Company continuously analyzes the allocation of its support resources and adjusts their alignment accordingly as
the Company shifts away from license-based software to its flagship SaaS products. The cost of maintenance and support
decreased by $77,000 in fiscal 2023 compared to fiscal 2022 as a result of reduced royalties related to third party components of
our CDI and Abstracting software. As clients move to other solutions, we expect these costs to continue to decline. The Company
expects the overall cost of maintenance and support to remain relatively flat in fiscal 2024 compared to fiscal 2023.
 
Cost
of professional fees and licenses – The cost of professional fees and licenses includes the cost of software licenses,
the cost of professional services and the cost of audit and coding services. The aggregate cost of professional fees and licenses
was $4,165,000 and $6,610,000 for fiscal 2023 and fiscal 2022 respectively. The decrease in cost of professional fees and licenses
was attributable to a reduction of personnel, contractors, and expenses related to a significant consulting-based client contract
that was terminated in the fourth quarter of fiscal 2022 which led to a decrease of $2,461,000 in employee, staff augmentation and
related expenses for fiscal 2023 as compared to fiscal 2022. In fiscal 2023, slight increases related to the cost of providing audit services with
compensation and benefits for internal audit services personnel, and related expenses resulted in total increased costs of $163,000,
while outside contracting decreased by $57,000 as compared to fiscal 2022. This cost shift reflects a move from contract labor to
employee labor to provide better service to our audit services clients.
 
Software license costs decreased $121,000
from fiscal 2022 to fiscal 2023 as a result of lower amortization of development costs associated with the Company’s Coding and
CDI product. The Company expects the remaining capitalized Coding and CDI software license costs to be fully amortized by the end of
fiscal 2024.
 
The gross margin on professional fees and licenses revenue decreased in fiscal 2023 as compared to fiscal 2022 primarily
due to the 48% decrease in related revenue including the high margin software license revenue.
 
Selling,
General and Administrative Expense
 


  
Fiscal Year  
2023 to 2022 Change 

(in thousands): 
2023  
2022  
$  
%      

General and administrative expenses 
$9,841  
$10,718  
$(877) 
 (8)%

Sales and marketing expenses 
 4,869  
 5,565  
 (696) 
 (13)%

Total selling, general, and administrative expense 
$14,710  
$16,283  
$(1,573) 
 (10)%

 
General
and administrative expenses comprise various costs including compensation and associated benefits, reimbursable travel and
entertainment expenses related to our executive and administrative staff, general corporate expenditures, amortization of intangible
assets, and occupancy costs. For fiscal 2023, the decrease of $877,000 as compared to fiscal 2022 was primarily attributable to a
reduction of $222,000 in employee compensation and related benefits, a $211,000 decrease in amortization costs, a $199,000 decrease
in rent expense, and a $189,000 decrease in bad debt expenses as compared to fiscal 2022.
 
In
alignment with the Company’s strategic plan to streamline operations, these expenses are strategically managed to support sustainable
growth, enhanced profitability, and improved cash flows. Additionally, recent adjustments in response to the loss of a major customer
underscore our commitment to adaptability and resilience in challenging market conditions. This comprehensive approach reflects our commitment
to simplifying our business operations while pursuing our overarching objectives.
 

31
 


 
Sales
and marketing expenses primarily encompass compensation, associated benefits, travel and entertainment costs for our sales and
marketing personnel. Additionally, sales and marketing expenses include costs from third parties related to advertising, marketing
and trade show attendance. In fiscal 2023, sales and marketing expenses decreased by $696,000 compared to fiscal 2022. The decline
in sales and marketing expense was comprised of a reduction in overall staff augmentation and other related expenses of
approximately $472,000 and a reduction of $182,000 related to trade shows and various other marketing services in fiscal 2023 as
compared to fiscal 2022.
 
For fiscal 2024, the Company expects increased expenses related to trade show participation and travel.
 
Research
and Development
 


  
Fiscal Year  
2023 to 2022 Change 

(in thousands): 
2023  
2022  
$  
%      

Research and development expense 
$5,704  
$6,042  
$(338) 
 (6)%

Capitalized research and development cost 
 1,697  
 2,019  
 (322) 
 (16)%

 
Research
and development expenses consist primarily of employee compensation and related benefits, the use of independent contractors for specific
near-term development projects and an allocated portion of general overhead costs, including occupancy costs, if material. Total research
and development expense and capitalized research and development expense for fiscal 2023 were $5,704,000 and $1,697,000, respectively.
The $338,000 decrease in research and development expense was driven by decreases of $529,000 for employee compensation and related benefits
and a decrease of $150,000 in independent contractor expense for fiscal 2023 compared to fiscal 2022. The decrease in employee and independent
contractor expenses drove a reduction of capitalized research and development cost of $322,000 in fiscal 2023 as compared to fiscal 2022.
The Company continues to focus research and development activities on eValuator and RevID, its flagship SaaS solutions.
 
For
fiscal 2023 and fiscal 2022, as a percentage of revenue, total research and development costs were approximately 23% and 25%, respectively. In
fiscal 2023, the Company was awarded $61,000 from the State of Georgia for its annual research and development tax credit. At the
end of fiscal 2023, the cumulative balance of unused research and development credits was $149,000. These research and development
tax credits can be applied to current Georgia payroll taxes due.
 
Impairment
of Goodwill
 
In
the third quarter of fiscal 2023, the Company tested the reporting unit’s goodwill for possible impairment as of October 31, 2023.
Refer to Note 6 – Goodwill and Intangible Assets to our consolidated financial statements included in Part II, Item 8, “Financial
Statements and Supplementary Data” for more information on the goodwill impairment testing.
 

32
 


 

The
Company concluded that goodwill was impaired based on the weighted combination of the discounted debt-free net cash flow and the market
capitalization method value estimates which resulted in a calculated fair value lower than its carrying value. The Company recorded an
impairment of goodwill in the amount of $9,813,000 for fiscal 2023, with no goodwill impairments reported in fiscal 2022.
 
Impairment
of long-lived assets
 
Intangible
assets consist of the following:
 


  
  
January 31, 2024 

  
Estimated Useful Life 
Gross Assets  
Accumulated Amortization  
Net Assets 

Finite-lived assets: 
  
    
    
   

Client relationships 
10 years 
$8,370,000  
$2,058,000  
$6,312,000 

Internally developed software 
9 years 
 6,380,000  
 1,742,000  
$4,638,000 

Trademarks and tradenames 
15 years 
 1,340,000  
 219,000  
$1,121,000 

Total 
  
$16,090,000  
$4,019,000  
$12,071,000 

 

As
mentioned above, in the third quarter of fiscal 2023, the Company tested long-lived assets, including intangible assets, for
recoverability that, if failed, would indicate impairment as of October 31, 2023. The Company, in reviewing long-lived assets to
define asset group(s), identified an abandoned asset. A separate long-lived asset for “client relationships” related to
the Avelead acquisition was no longer going to be used following the Company’s determination that these services were not part
of its core offerings going forward and was classified as abandoned (the “Abandoned Asset”). The Company adjusted the
Abandoned Asset’s carrying value to its salvage value which would be zero given no future cash flows. In fiscal 2023, the Company recorded $963,000 for the impairment of the Abandoned Asset with no other long-lived
impairments reported in fiscal 2022. The Company wrote-off the Abandoned Asset during fiscal 2023 with a gross asset value of $1,330,000.
There was no impact to the consolidated statements of operations as this eliminated the asset and accumulated amortization of the fully
amortized intangible assets.
 
Refer
to Note 6 – Goodwill and Intangible Assets to our consolidated financial statements included in Part II, Item 8, “Financial
Statements and Supplementary Data” for more information on the long-lived asset impairment testing.
 
Other
(Expense) income
 


  
Fiscal Year  
2023 to 2022 Change 

(in thousands): 
2023  
2022  
$  
%      

Interest expense 
$(1,071) 
$(749) 
$(322) 
 43%

Acquisition earnout valuation adjustments 
 1,944  
 71  
 1,873  
 2638%

Other 
 31  
 201  
 (170) 
 (85)%

Total other (expense) income 
$904  
$(477) 
$1,381  
 (290)%

 
Interest
expense consists of interest associated with the term loan and the revolving line of credit, deferred financing costs, less interest
related to capitalization of software. Interest expense increased in fiscal 2023 from the prior year period primarily due to the
$10,000,000 term loan with Western Alliance Bank (Refer to Note 5 – Debt to our consolidated financial statements included in
Part II, Item 8, “Financial Statements and Supplementary Data” for additional information) and higher interest rates.
Further, interest rates increased at an accelerated pace in fiscal 2023. The Board of Governors of the Federal Reserve (the
“Federal Reserve”) has been reacting to inflation through interest rate increases. Recent interest rate increases are
expected to continue at a slower pace than that experienced in fiscal 2023. Until such time as the Federal Reserve begins to
decrease interest rates, the Company expects increased interest expense (year-over-year) for fiscal 2024.
 
Acquisition
earnout valuation adjustments for fiscal 2023 include a valuation adjustment of $1,944,000 compared to an adjustment of $71,000 for fiscal
2022. The valuation adjustment is related to the acquisition earnout liabilities associated with the Avelead acquisition (Refer to Note
3 – Business Combination of the consolidated financial statements included in Part II, Item 8, “Financial
Statements and Supplementary Data”).
 
Other
income for fiscal 2023 and fiscal 2022 primarily includes income related to the sublease of the Alpharetta location (Refer to Note 4
– Operating Leases).
 
Provision
for Income Taxes
 
For fiscal 2023 and fiscal 2022, we recorded income tax benefit of $46,000 and tax expense of $71,000, respectively,
which is comprised of estimated federal, state, and local income tax provisions. The Company has a substantial amount of net operating
losses for federal and state income tax purposes. The Company recorded an increase to the federal income tax valuation allowance in each
of fiscal 2023 and fiscal 2022 of approximately $4.0 and $2.0 million, respectively, which offset related tax benefits for operating
losses.
 

33
 

 
Use
of Non-GAAP Financial Measures
 
In
order to provide investors with greater insight and allow for a more comprehensive understanding of the information used by management
and the Board of Directors in its financial and operational decision-making, the Company has supplemented the Consolidated Financial
Statements presented on a GAAP basis in this Report with the following non-GAAP financial measures: EBITDA, Adjusted EBITDA, and Adjusted
EBITDA Margin.
 
These
non-GAAP financial measures have limitations as analytical tools and should not be considered in isolation or as a substitute for analysis
of Company results as reported under GAAP. The Company compensates for such limitations by relying primarily on our GAAP results and
using non-GAAP financial measures only as supplemental data. We also provide a reconciliation of non-GAAP to GAAP measures used. Investors
are encouraged to carefully review this reconciliation. In addition, because these non-GAAP measures are not measures of financial performance
under GAAP and are susceptible to varying calculations, these measures, as defined us, may differ from and may not be comparable to similarly
titled measures used by other companies.
 
EBITDA,
Adjusted EBITDA, and Adjusted EBITDA Margin
 
We
define: (i) EBITDA as net earnings (loss) before net interest expense, income tax expense (benefit), depreciation and amortization; (ii)
Adjusted EBITDA as net earnings (loss) before net interest expense, income tax expense (benefit), depreciation, amortization, share-based
compensation expense, transaction related expenses, and other expenses or benefits that do not relate to our core operations such as
severance and impairment charges and debt forgiveness; and (iii) Adjusted EBITDA Margin as Adjusted EBITDA as a percentage of GAAP net
revenue. EBITDA, Adjusted EBITDA, and Adjusted EBITDA Margin are used to facilitate a comparison of our operating performance on a consistent
basis from period to period and provide for a more complete understanding of factors and trends affecting our business than GAAP measures
alone. These measures assist management and the Board and may be useful to investors in comparing our operating performance consistently
over time as they remove the impact of our capital structure (primarily interest charges), asset base (primarily depreciation and amortization),
items outside the control of the management team (taxes) and expenses that do not relate to our core operations including: transaction-related
expenses (such as professional and advisory services), corporate restructuring expenses (such as severances) and other operating costs
that are expected to be non-recurring in nature. Adjusted EBITDA removes the impact of share-based compensation expense, which is another
non-cash item.
 
The
Board of Directors and management also use these measures (i) as one of the primary methods for planning and forecasting overall expectations
and for evaluating, on at least a quarterly and annual basis, actual results against such expectations; and (ii) as a performance evaluation
metric in determining achievement of certain executive and associate incentive compensation programs.
 
Our
lender uses a measurement that is similar to the Adjusted EBITDA measurement described herein to assess our operating performance. The
lender under our Loan Agreement requires delivery of compliance reports certifying compliance with financial covenants, certain of which
are based on a measurement that is similar to the Adjusted EBITDA measurement reviewed by our management and Board of Directors.
 
EBITDA,
Adjusted EBITDA and Adjusted EBITDA Margin are not measures of liquidity under GAAP or otherwise and are not alternatives to cash flow
from continuing operating activities, despite the advantages regarding the use and analysis of these measures as mentioned above. EBITDA,
Adjusted EBITDA, and Adjusted EBITDA Margin, as disclosed in this Report have limitations as analytical tools, and you should not consider
these measures in isolation or as a substitute for analysis of our results as reported under GAAP; nor are these measures intended to
be measures of liquidity or free cash flow for our discretionary use. Some of the limitations of EBITDA and its variations are:
 


 
●
EBITDA
    does not reflect our cash expenditures or future requirements for capital expenditures or contractual commitments;

 
 
 

 
●
EBITDA
    does not reflect changes in, or cash requirements for, our working capital needs;

 

34
 

 



 
●
EBITDA
    does not reflect the interest expense, or the cash requirements to service interest or principal payments under our Loan Agreement;

 
 
 

 
●
EBITDA
    does not reflect income tax payments that we may be required to make; and

 
 
 

 
●
Although
    depreciation and amortization are non-cash charges, the assets being depreciated and amortized often will have to be replaced in
    the future, and EBITDA does not reflect any cash requirements for such replacements.

 
Adjusted
EBITDA has all the inherent limitations of EBITDA. To properly and prudently evaluate our business, the Company encourages readers to
review the GAAP financial statements included elsewhere in this Report, and not rely on any single financial measure to evaluate our
business. We also strongly urge readers to review the reconciliation of these non-GAAP financial measures to the most comparable GAAP
measure in this section, along with the consolidated financial statements included in Part II, Item 8, “Financial Statements and
Supplementary Data”.
 
The
following table reconciles EBITDA and Adjusted EBITDA to net loss  for the fiscal years ended January 31, 2024
and 2023 (amounts in thousands). All of the items included in the reconciliation from EBITDA and Adjusted EBITDA to net loss  are either recurring non-cash items, or items that management does not consider in assessing our on-going operating performance.
In the case of the non-cash items, management believes that investors may find it useful to assess the Company’s comparative operating
performance because the measures without such items are less susceptible to variances in actual performance resulting from depreciation,
amortization and other expenses that do not relate to our core operations and are more reflective of other factors that affect operating
performance. In the case of items that do not relate to our core operations, management believes that investors may find it useful to
assess our operating performance if the measures are presented without these items because their financial impact does not reflect ongoing
operating performance.
 


  
Fiscal Year 

(in thousands) 
2023       
2022      

Adjusted EBITDA Reconciliation 
    
   

Net loss 
$(18,697) 
$(11,379)

Interest expense 
 1,071  
 749 

Income tax expense (benefit) 
 (46) 
 71 

Depreciation and amortization 
 4,229  
 4,233 

EBITDA 
 (13,443) 
 (6,326)

Share-based compensation expense 
 2,102  
 1,680 

Impairment of goodwill 
 9,813  
 — 

Impairment of long-lived assets 
 963  
 — 

Non-cash valuation adjustments 
 (1,944) 
 (71)

Acquisition-related costs, severance, and transaction-related bonuses 
 397  
 1,149 

Other non-recurring expenses 
 (33) 
 (189)

Restructuring charges 
 759  
 — 

Adjusted EBITDA 
$(1,386) 
$(3,757)

Adjusted EBITDA margin (1) 
 (6)% 
 (15)%

 


(1)
Adjusted
    EBITDA as a percentage of GAAP net revenues.

 
Application
of Critical Accounting Policies
 
The
following is a summary of the Company’s most critical accounting policies. Refer to Note 2 – Significant Accounting Policies
to our consolidated financial statements included in Part II, Item 8, “Financial Statements and Supplementary Data” for a
complete discussion of the significant accounting policies and methods used in the preparation of our consolidated financial statements.

35
 


 
Revenue
Recognition
 
The
Company derives revenue from the sale of internally developed software, either by licensing for local installation or by a SaaS delivery
model, through our direct sales force or through third-party resellers. Licensed, locally installed clients on a perpetual model utilize
our support and maintenance services for a separate fee, whereas term-based locally installed license fees and SaaS fees include support
and maintenance. The Company also derives revenue from professional services that support the implementation, configuration, training
and optimization of the applications, as well as audit and consulting services The Company recognizes revenue to depict the transfer
of promised goods or services to clients in an amount that reflects the consideration to which the entity expects to be entitled in exchange
for those goods or services.
 
Performance
obligations are the unit of accounting for revenue recognition and generally represent the distinct goods or services that are promised
to the client. If we determine that we have not satisfied a performance obligation, we will defer recognition of the revenue until the
performance obligation is deemed to be satisfied. Maintenance and support and SaaS agreements are generally non-cancellable or contain
significant penalties for early cancellation, although clients typically have the right to terminate their contracts for cause if we
fail to perform material obligations. However, if non-standard acceptance periods, non-standard performance criteria, or cancellation
or right of refund terms are required, revenue is recognized upon the satisfaction of such criteria. Certain contracts may include aspects
of variable consideration as it relates to performance guarantees and service level agreements. Significant judgment is required to determine
the standalone selling price (“SSP”) for each performance obligation, impact of variable consideration on total contract
price, the amount allocated to each performance obligation and whether it depicts the amount that the Company expects to receive in exchange
for the related product and/or service. The Company recognizes revenue for implementation for certain of its eValuator SaaS solution
over the contract term, as it has been determined that those implementation services are not a distinct performance obligation. Services
for other SaaS and Software solutions such as CDI, RevID and Compare, have been determined as a distinct performance obligation. For
these agreements, the Company estimates SSP of its software licenses using the residual approach when the software license is sold with
other services and observable SSPs exist for the other services. The Company estimates the SSP for maintenance, professional services,
software as a service and audit services based on observable standalone sales.
 
Refer
to Note 2 – Significant Accounting Policies to our consolidated financial statements included in Part II, Item 8, “Financial
Statements and Supplementary Data” for additional information regarding our revenue recognition policies.
 
Capitalized
Software Development Costs
 
Software
development costs for software to be sold, leased, or marketed are accounted for in accordance with Accounting Standards Codification
(“ASC”) 985-20, Software — Costs of Software to be Sold, Leased or Marketed. Costs associated with the planning
and design phase of software development are classified as research and development costs and are expensed as incurred. Once technological
feasibility has been established, a portion of the costs incurred in development, including coding, testing and quality assurance, are
capitalized until available for general release to clients, and subsequently reported at the lower of unamortized cost or net realizable
value. Amortization is calculated on a solution-by-solution basis and is included in cost of professional fees and licenses on the consolidated
statements of operations. Annual amortization is measured at the greater of a) the ratio of the software product’s current gross
revenues to the total of current and expected gross revenues or b) straight-line over the remaining economic life of the software (typically
two years). Unamortized capitalized costs determined to be in excess of the net realizable value of a solution are expensed at the date
of such determination.
 

36
 

 

Internal-use
software development costs are accounted for in accordance with ASC 350-40, Internal-Use Software. The costs incurred in the preliminary
stages of development are expensed as research and development costs as incurred. Once an application has reached the development stage,
internal and external costs incurred to develop internal-use software are capitalized and amortized on a straight-line basis over the
estimated useful life of the software (typically three to four years). Maintenance and enhancement costs, including those costs in the
post-implementation stages, are typically expensed as incurred, unless such costs relate to substantial upgrades and enhancements to
the software that result in added functionality, in which case the costs are capitalized and amortized on a straight-line basis over
the estimated useful life of the software. The Company reviews the carrying value for impairment whenever facts and circumstances exist
that would suggest that assets might be impaired or that the useful lives should be modified. Amortization expense related to capitalized
internal-use software development costs is included in Cost of software as a service on the consolidated statements of operations.
 
Goodwill
and Intangible Assets
 
Goodwill
and other intangible assets were recognized in conjunction with the acquisitions of Interpoint Partners, LLC (“Interpoint”),
Meta Health Technology, Inc. (“Meta”), Clinical Looking Glass® (“CLG”), Opportune IT, Unibased Systems Architecture,
Inc. (“Unibased”), and Avelead. Identifiable intangible assets include purchased intangible assets with finite lives, which
primarily consist of internally-developed software, client relationships, non-compete agreements and license agreements. Finite-lived
purchased intangible assets are amortized over their expected period of benefit, which generally ranges from one month to 15 years, using
the straight-line method.
 
We
assess the useful lives and possible impairment of existing recognized goodwill on at least an annual basis, and goodwill and intangible
assets when an event occurs that may trigger such a review. Factors considered important which could trigger a review include:
 


 
●
significant
    under-performance relative to historical or projected future operating results;

 
 
 

 
●
significant
    changes in the manner of use of the acquired assets or the strategy for the overall business;

 
 
 

 
●
identification
    of other impaired assets within a reporting unit;

 
 
 

 
●
disposition
    of a significant portion of an operating segment;

 
 
 

 
●
significant
    negative industry or economic trends;

 
 
 

 
●
significant
    decline in the Company’s stock price for a sustained period; and

 
 
 

 
●
a
    decline in the market capitalization relative to the net book value.

 

37
 


 
The
Company completed its annual goodwill assessment for fiscal 2023 as of October 31, 2023. We used a weighted sum of income and market
approaches to determine the fair value of the Company’s goodwill. Under the income approach, the fair value was based on the present
value of the estimated debt-free, discounted cash flows that the reporting unit is expected to generate. Cash flow projections were based
on management’s estimates of revenue growth rates and operating margins, taking into consideration industry and market conditions.
The discount rate was based on the weighted average cost of capital appropriate for the Company.
 
In
the third quarter of fiscal 2023, the Company received a notice from a significant SaaS client of its intent not to renew its contract
following the expiration of the current term on December 31, 2023. The Company also announced it was accelerating the Strategic Restructuring
to reduce costs while continuing the Company’s focus on expanding its SaaS operations. These announcements triggered a significant
decrease in the Company’s share price. Based on these factors, we determined there were indicators that the goodwill may be impaired,
and accordingly, performed an interim goodwill impairment test as of October 31, 2023. The results of the impairment test showed the
fair value of the reporting unit was lower than the carrying value, resulting in a $9.8 million goodwill impairment charge. As of January
31, 2024, no further impairment was required for goodwill. The remaining goodwill balance of the Company after recording the goodwill
impairment charge is $13.3 million.
 
Also,
during the third quarter of fiscal 2023, due to the factors discussed above, we assessed whether the carrying amounts of the Company’s
long-lived assets may not be recoverable and, therefore, impaired. Our assessment resulted in an impairment charge of $1.0 million, primarily
attributable to client relationships related to a subset of consulting related services the Company expects will not be a core part of
its business going forward. The impairment charge was calculated using the asset’s salvage value as it was considered no longer
held for use.
 
The
fair value of our reporting unit and intangible assets is subjective in nature and involves the use of significant estimates and assumptions,
particularly related to future operating results and cash flows. These estimates and assumptions include, but are not limited to, revenue
growth rates and operating margins used to calculate projected future cash flows, risk-adjusted discount rates, and future economic and
market conditions. If we do not achieve our forecasts or the Company’s share price declines further, it is possible the goodwill
of the Company could be deemed to be impaired again in a future period.
 
The
risks and potential impacts on the fair value of our goodwill and long-lived assets are included in our risk factor disclosures referenced
under “Item 1A. Risk Factors”.
 
Income
Taxes
 
Income
taxes are accounted for under the asset and liability method. Deferred tax assets and liabilities are recognized for the future tax consequences
attributable to differences between the financial statement carrying amounts of existing assets and liabilities and their respective
tax bases and for tax credits and loss carry-forwards. Deferred tax assets and liabilities are measured using enacted tax rates expected
to apply to taxable income in the years in which those temporary differences are expected to be recovered or settled. In assessing net
deferred tax assets, we consider whether it is more likely than not that some or all of the deferred tax assets will not be realized.
We establish a valuation allowance when it is more likely than not that all or a portion of deferred tax assets will not be realized.
Refer to Note 7 – Income Taxes to our consolidated financial statements included in Part II, Item 8, “Financial Statements
and Supplementary Data” for further details.
 

38
 

 

Liquidity
and Capital Resources
 
Overview
 
The
Company’s liquidity is dependent upon numerous factors including: (i) the timing and amount of revenues and collection of contractual
amounts from clients, (ii) amounts invested in research and development and capital expenditures, and (iii) the level of operating expenses,
all of which can vary significantly from quarter-to-quarter. The Company’s primary cash requirements include regular payment of
payroll and other business expenses, principal and interest payments on debt and minor amounts of capital expenditures. Capital expenditures
generally include computer hardware and computer software to support internal development efforts or SaaS data center infrastructure.
Operations are funded with cash generated by operations and borrowings under the bank credit facilities. The Company believes that cash
flows from operations and available credit facilities are adequate to fund current obligations for twelve months from the date of issuance
of the audit report on the Company’s consolidated financial statements. Cash and cash equivalent balances at January 31, 2024 and
2023 were $3,190,000 and $6,598,000, respectively. 
 
Capital
Raise
 
Registered
Direct Offering
 
On
October 24, 2022, the Company entered into purchase agreements with certain investors pursuant to which the Company agreed to issue and
sell in a registered direct offering (the “2022 Offering”) an aggregate of 6,299,989 shares of common stock, par value $0.01
per share, at a purchase price of $1.32 per share. The gross proceeds to the Company from the 2022 Offering were approximately $8,316,000.
The Company intends to use the proceeds of the 2022 Offering for general corporate purposes. The 2022 Offering closed on October 26,
2022.
 
Debt
Private Placement
 
On
February 1, 2024, the Company entered into a securities purchase agreement with certain accredited investors, including certain directors
and officers of the Company, pursuant to which the Company agreed to sell to the investors unsecured subordinated promissory notes in
the aggregate principal amount of $4.4 million and warrants to purchase up to an aggregate of 4,052,631 shares of the Company’s
common stock in a private placement (the “Debt Private Placement”). The closing of the Debt Private Placement occurred on
February 7, 2024. Refer to Note 14 – Subsequent Events to our consolidated financial statements included in Part II, Item 8, “Financial
Statements and Supplementary Data” for additional information regarding the Debt Private Placement.
 
Common
Stock Private Placement
 
On
February 6, 2024, the Company completed the sale of 263,158 shares of the Company’s common stock to an accredited investor at a
purchase price of $0.38 per share for an aggregate purchase price of $100,000 (the “Common Stock Private Placement”). Refer
to Note 14 – Subsequent Events to our consolidated financial statements included in Part II, Item 8, “Financial Statements
and Supplementary Data” for additional information regarding the Common Stock Private Placement.
 
Authorized
Shares Amendment
 
At
the 2022 Annual Meeting of Stockholders (the “2022 Annual Meeting”) held on June 7, 2022, the Company’s stockholders
approved an amendment to the Streamline Health Solutions, Inc. Third Amended and Restated 2013 Plan (the “2013 Plan”) to
increase the number of shares of the Company’s common stock authorized for issuance thereunder by 2,000,000 shares, from 8,223,246
shares to 10,223,246 shares. The Company’s stockholders also approved an amendment to the Company’s Certificate of Incorporation,
as amended, to increase the total number of authorized shares of the Company’s common stock from 65,000,000 shares to 85,000,000
shares.
 
At
the 2023 Annual Meeting of Stockholders (the “2023 Annual Meeting”) held on June 15, 2023, the Company’s stockholders
approved an amendment to the 2013 Plan to increase the number of shares of the Company’s common stock authorized for issuance thereunder
by 1,000,000 shares, from 10,223,246 shares to 11,223,246 shares.
 

39
 

 
Credit
Facility
 
The
Company has liquidity through the Loan Agreement with Western Alliance Bank (“WAB”). On November 29, 2022, the Company executed
the Second Modification (the “Second Modification”) to the Loan Agreement which expanded the Company’s total borrowing
to include a $2,000,000 revolving line of credit. The revolving line of credit is co-terminus with the term loan portion of the Loan
Agreement and matures on August 26, 2026. There are no requirements to draw on the line of credit. Amounts outstanding under the line
of credit portion of the Loan Agreement bear interest at a per annum rate equal to the Prime Rate (as published in The Wall Street Journal)
plus 1.5%, with a Prime “floor” rate of 3.25%. The Second Modification also amended certain financial covenants under the
Loan Agreement. Refer to Note 5 – Debt to our consolidated financial statements included in Part II, Item 8, “Financial Statements
and Supplementary Data” for additional information regarding the Loan Agreement and the Second Modification. At January 31, 2024,
there was a $1,500,000 outstanding balance on the revolving line of credit.
 
Under
the Loan Agreement, the Company has a term loan facility with an initial, maximum, principal amount of $10,000,000. Amounts outstanding
under the Loan Agreement bear interest at a per annum rate equal to the Prime Rate (as published in The Wall Street
Journal) plus 1.5%, with a Prime “floor” rate of 3.25%.
 
The
Second Modification includes customary financial covenants as follows:
 


 
a.
Minimum
    Cash. Borrowers shall, at all times, maintain unrestricted cash in an amount not less than Two Million Dollars ($2,000,000).

 
 
 

 
b.
Maximum
    Debt to ARR Ratio. Borrowers’ Maximum Debt to ARR Ratio, measured on a quarterly basis as of the last day of each fiscal
    quarter, shall not be greater than the amount set forth under the heading “Maximum Debt to ARR Ratio” as of, and for
    each of the dates appearing adjacent to such “Maximum Debt to ARR Ratio”.

 


Quarter
    Ending
 
 
Maximum
                                            Debt to
ARR
    Ratio
 

October
    31, 2022
 
 
0.80
    to 1.00
 

January
    31, 2023
 
 
0.70
    to 1.00
 

April
    30, 2023
 
 
0.65
    to 1.00
 

July
    31, 2023
 
 
0.60
    to 1.00
 

October
    31, 2023
 
 
0.55
    to 1.00
 

January
    31, 2024
 
 
0.55
    to 1.00
 

 


 
c.
Maximum
    Debt to Adjusted EBITDA Ratio. Commencing with the quarter ending April 30, 2024, Borrowers’ Maximum Debt to Adjusted EBITDA
    Ratio, measured on a quarterly basis as of the last day of each fiscal quarter for the trailing four (4) quarter period then ended,
    shall not be greater than the amount set forth under the heading “Maximum Debt to Adjusted EBITDA Ratio” as of, and for
    each of the dates appearing adjacent to such “Maximum Debt to Adjusted EBITDA Ratio”.

 


Quarter
    Ending
 
 
Maximum
    Debt to Adjusted EBITDA Ratio
 

April
    30, 2024
 
 
3.50
    to 1.00
 

July
    31, 2024, and on the last day of each quarter, thereafter
 
 
2.00
    to 1.00
 

 


 
d.
Fixed
    Charge Coverage Ratio. Commencing with the quarter ending April 30, 2024, Borrowers shall maintain a Fixed Charge Coverage Ratio
    of not less than 1.20 to 1.00, measured on a quarterly basis as of the last day of each fiscal quarter for the trailing four (4)
    quarter period then ended.

 

40
 


 
The
Loan Agreement includes customary negative covenants, subject to exceptions, which limit transfers, capital expenditures,
indebtedness, certain liens, investments, acquisitions, dispositions of assets, restricted payments, and the business activities of
the Company, as well as customary representations and warranties, affirmative covenants and events of default, including cross
defaults and a change of control default. The line of credit is also subject to customary prepayment requirements. For the period
ended January 31, 2024, the Company was not in compliance with the Maximum Debt to ARR Ratio covenant under the Loan Agreement; however, on February 7, 2024, the Company received a waiver from WAB in connection with the execution of the Third
Modification (as defined below). Refer to Note 5 – Debt to our consolidated financial statements included in Part II, Item 8,
“Financial Statements and Supplementary Data” for more information.
 
On
February 7, 2024, the Company executed the Third Modification and Waiver (the “Third Modification”) to the Loan Agreement.
Refer to Note 14 – Subsequent Events to our consolidated financial statements included in Part II, Item 8, “Financial Statements
and Supplementary Data” for additional information regarding the Third Modification.
 
Significant
cash obligations
 


  
As of January, 31 

(in thousands) 
2024  
2023 

Term loan (1) 
$9,066  
$9,714 

 


(1)
Term loan balance is reported net of unamortized deferred financing costs
of $69,000 and $105,000 plus accrued financing costs payable of $135,000 and $69,000 each as of January 31, 2024 and 2023, respectively.
Refer to Note 5 – Debt to our consolidated financial statements included in Part II, Item 8, “Financial Statements and Supplementary
Data” for additional information. The term loan balance as of January 31, 2024 and January 31, 2023 was bank term debt.

 
Operating
cash flow activities
 


  
Fiscal Year 

(in thousands) 
2023  
2022 

Net loss 
$(18,697) 
$(11,379)

Non-cash adjustments to net loss 
 15,151  
 6,120 

Cash impact of changes in assets and liabilities 
 1,331  
 (1,884)

Net cash used in operating activities 
$(2,215) 
$(7,143)

 
The
Company had a higher net loss from operations and higher non-cash adjustments to net loss primarily due to higher rates of amortization
and goodwill and intangible impairments than fiscal 2023.  The Company’s accounts receivable was significantly lower in fiscal
2023 as compared to fiscal 2022 primarily due to the timing of collection on certain annual invoices.
 

41
 

 
Investing
cash flow activities
 


  
Fiscal Year 

(in thousands) 
2023  
2022 

Purchases of property and equipment 
 (54) 
 (10)

Capitalized software development costs 
 (1,567) 
 (1,924)

Net cash used in investing activities 
$(1,621) 
$(1,934)

 
The
cash used in investing activities for fiscal 2023 and fiscal 2022 includes capitalized software development costs. The Company expects
continued capitalizable projects associated with the Company’s flagship products; however, the rate of capitalization may temporarily
remain constant or decrease as a result of the 2023 Restructuring.
 
Financing
cash flow activities
 


  
Fiscal Year 

(in thousands) 
2023  
2022 

Proceeds from issuance of common stock 
$—  
$8,316 

Proceeds from line of credit 
 1,500  
 — 

Payments of acquisition earnout liabilities 
 —  
 (2,012)

Payments for costs directly attributable to the issuance of common stock 
 —  
 (52)

Repayment of bank term loan 
 (750) 
 (250)

Proceeds from term loan payable 
 —  
 — 

Payments related to settlement of employee shared-based awards 
 (280) 
 (197)

Payment of deferred financing costs 
 (44) 
 (20)

Other 
 2  
 6 

Net cash provided by financing activities 
$428  
$5,791 

 
The
cash provided by financing activities for fiscal 2023 was primarily attributable to draws on the line of credit offset by the principal
payments on the term loan. Refer to Note 5 – Debt to our consolidated financial statements included in Part II, Item 8, “Financial
Statements and Supplementary Data” for more information. The $44,000 of deferred financing costs payments are related to the debt private financing as further described in
Note 14 – Subsequent to our consolidated financial statements included in Part II, Item 8, “Financial Statements and Supplementary
Data.”
 
The cash provided by financing activities for fiscal 2022 was primarily
attributable to the 2022 Offering of the Company’s common stock, which closed on October 26, 2022, offset by earnout payments related
to the Avelead acquisition. Refer to Note 8 – Equity to our consolidated financial statements included in Part II, Item 8, “Financial
Statements and Supplementary Data” for additional information on the 2022 Offering.
 
Item
7A. Quantitative and Qualitative Disclosures About Market Risk
 
As
a “smaller reporting company,” as defined by Item 10 of Regulation S-K, we are not required to provide this information.
 

42
 

 

Item
8. Financial Statements and Supplementary Data
 
INDEX
TO CONSOLIDATED FINANCIAL STATEMENTS AND SCHEDULE COVERED BY REPORTS OF INDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRM
 


Report of Independent Registered Public Accounting Firm
44

Consolidated Balance Sheets at January 31, 2024 and 2023
47

Consolidated Statements of Operations for the two years ended January 31, 2024
49

Consolidated Statements of Changes in Stockholders’ Equity for the two years ended January 31, 2024
50

Consolidated Statements of Cash Flows for the two years ended January 31, 2024
51

Notes to Consolidated Financial Statements
52

Schedule II — Valuation and Qualifying Accounts
80

 
All
other financial statement schedules are omitted because they are not applicable or the required information is included in the consolidated
financial statements or notes thereto.
 

43
 


 
Report
of Independent Registered Public Accounting Firm
 
Stockholders
and Board of Directors of
Streamline
Health Solutions, Inc.
 
Opinion
on the Consolidated Financial Statements
 
We
have audited the accompanying consolidated balance sheets of Streamline Health Solutions, Inc. and its subsidiaries (the “Company”)
as of January 31, 2024 and 2023, the related consolidated statements of operations, changes in stockholders’ equity, and cash flows
for each of the years in the two-year period ended January 31, 2024, and the related notes and financial statement schedule II (collectively
referred to as the “financial statements”). In our opinion, the financial statements referred to above present fairly, in
all material respects, the financial position of the Company as of January 31, 2024 and 2023, and the results of their operations and
their cash flows for each of the years in the two-year period ended January 31, 2024, in conformity with accounting principles generally
accepted in the United States of America (“U.S. GAAP”).
 
Basis
for Opinion
 
These
financial statements are the responsibility of the Company’s management. Our responsibility is to express an opinion on the Company’s
financial statements based on our audits.
 
We
are a public accounting firm registered with the Public Company Accounting Oversight Board (United States) (“PCAOB”) and
are required to be independent with respect to the Company in accordance with the U.S. federal securities laws and the applicable rules
and regulations of the Securities and Exchange Commission and the PCAOB.
 
We
conducted our audits in accordance with the standards of the PCAOB. Those standards require that we plan and perform the audit to obtain
reasonable assurance about whether the financial statements are free of material misstatement, whether due to error or fraud. The Company
is not required to have, nor were we engaged to perform, an audit of its internal control over financial reporting. As part of our audits,
we are required to obtain an understanding of internal control over financial reporting but not for the purpose of expressing an opinion
on the effectiveness of the Company’s internal control over financial reporting. Accordingly, we express no such opinion.
 
Our
audits included performing procedures to assess the risks of material misstatement of the financial statements, whether due to error
or fraud, and performing procedures that respond to those risks. Such procedures include examining, on a test basis, evidence regarding
the amounts and disclosures in the financial statements. Our audits also included evaluating the accounting principles used and significant
estimates made by management, as well as evaluating the overall presentation of the financial statements. We believe that our audits
provide a reasonable basis for our opinion.
 
Critical
Audit Matters
 
The
critical audit matters communicated below are matters arising from the current-period audit of the financial statements that were communicated
or required to be communicated to the audit committee and that: (1) relate to accounts or disclosures that are material to the financial
statements and (2) involved our especially challenging, subjective, or complex judgments. The communication of critical audit matters
does not alter in any way our opinion on the financial statements, taken as a whole, and we are not, by communicating the critical audit
matters below, providing separate opinions on the critical audit matters or on the accounts or disclosures to which they relate.
 


44
 


 
Critical
Audit Matter – Capitalized Software Development Costs
 
As
described in Note 2 to the financial statements, the Company develops internal-use software within the scope of ASC 350-40, Internal-Use
Software (“Topic 350”). Costs associated with the preliminary stages of development are classified as research and development
costs and expensed as incurred. Costs associated with the application development stage are capitalized. Maintenance and enhancement
costs, including costs in the post-implementation stages, are typically expensed as incurred, unless such costs relate to substantial
upgrades and enhancements that result in added functionality, in which case the costs are capitalized. Capitalized amounts are amortized
on a straight-line basis over the estimated useful life of the software.
 
We
identified capitalized internal-use software development costs as a critical audit matter. Our principal considerations for this determination
were the high degree of auditor judgment and subjectivity required in evaluating management’s determination of the activities and
costs that qualify for capitalization.
 
The
primary procedures we performed to address this critical audit matter included:

 



 
●
Obtained an
    understanding of the Company’s process for determining the activities and costs that qualify for capitalization.

 
●
Tested the mathematical
    accuracy of the roll forward of capitalized software and related amortization expense. We also tested the completeness and accuracy
    of applicable system-generated reports, including reconcilements of details to associated sub-ledgers.

 
●
For a sample of capitalized
    costs, we evaluated the relevance of the software development guidance applied, by performing the following:

 



 
○
Assessed the eligibility of costs
    for capitalization, in accordance with applicable guidance, and whether such costs were incurred during the application development
    stage.

 
○
Recalculated the capitalized amount based on hours
    incurred for direct payroll related costs or associated vendor contracts and invoices for work performed by third parties.

 
○
Evaluated the software implementation timelines supporting
    the capitalization periods for implementation and development as well as the dates software was placed in service.

 
○
Inquired of product managers and software engineers
    for significant projects to assess the nature of the costs and the time devoted to capitalizable activities.

 

45
 



 
Critical
Audit Matter – Goodwill Impairment Assessment
 
As
described in Notes 2 and 6 to the financial statements, based on triggering events, the Company identified indicators of possible impairment
and initiated testing using a valuation date of October 31, 2023. The testing for impairment was performed under the guidance of ASC
350, Intangibles – Goodwill and Other (“Topic 350”). The Company recorded an impairment of goodwill in the amount
of $9,813,000.
 
In
analyzing goodwill for potential impairment in the quantitative impairment test, the Company uses a combination of the income and market
approaches to estimate the fair value of the Company’s equity. Under the income approach, the Company calculates the fair value
based on discounted estimated future cash flows. Under the market approach, the Company estimates the fair value based on the total number
of shares outstanding and the current market price of the shares as of the valuation date with a control premium applied.
 
We
identified the quantitative impairment test of goodwill as a critical audit matter. Our principal considerations for that determination
included the judgment involved in assessing management’s impairment test of goodwill due to the measurement uncertainty involved
in determining the fair value of equity of the reporting unit. In particular, the fair value estimate under the income approach is sensitive
to changes in assumptions such as discount rates and expected future cash flows.
 
The
primary procedures we performed to address this critical audit matter included:
 



 
●
Obtained an understanding of management’s
    process for assessing goodwill impairment and performing the quantitative goodwill impairment test, including management’s
    process for developing assumptions used in the income and market approaches to estimate the fair value of equity.

 
●
Evaluated management’s revenue growth rates,
    margins, and cash flows against current industry and economic trends, while also considering the current and future business, customer
    base, and product mix.

 
●
Assessed revenue growth and margins by comparing past
    projections to actual performance.

 
●
With the assistance of our valuation professionals
    with specialized skills and knowledge, we evaluated the (1) valuation methodology, (2) discount rate, and (3) long-term revenue growth
    rate used in the income approach to estimate the fair value.

 
●
Tested management’s reconciliation of the fair
    value of equity to the market capitalization of the Company.

 
●
Evaluated
    developments in the Company’s business from the third quarter of fiscal 2023, the period in which the impairment charge was
    recorded, through January 31, 2024 to determine if events or circumstances have occurred that would more likely than not further
    reduce the fair value of the business.

 
/s/
FORVIS, LLP 
 
We
have served as the Company’s auditor since 2019.
 
Atlanta,
Georgia
April
30, 2024
 

46
 


 
STREAMLINE
HEALTH SOLUTIONS, INC. AND SUBSIDIARIES
CONSOLIDATED
BALANCE SHEETS
 
(rounded
to the nearest thousand dollars, except share and per share information)
 


  
2024  
2023 

  
January 31, 

  
2024  
2023 

ASSETS 
   
  

Current assets: 
    
   

Cash and cash equivalents 
$3,190,000  
$6,598,000 

Accounts receivable, net of allowance for credit losses of $86,000 and $132,000, respectively 
 4,237,000  
 7,719,000 

Contract receivables 
 780,000  
 960,000 

Prepaid and other current assets 
 629,000  
 710,000 

Total current assets 
 8,836,000  
 15,987,000 

Non-current assets: 
    
   

Property and equipment, net of accumulated amortization of $291,000 and $246,000 respectively 
 88,000  
 79,000 

Right-of use asset for operating lease 
 —  
 32,000 

Capitalized software development costs, net of accumulated amortization of $7,960,000
and $6,224,000,
respectively 
 5,798,000  
 5,846,000 

Intangible assets, net of accumulated amortization of $4,019,000 and $2,627,000, respectively 
 12,071,000  
 14,793,000 

Goodwill 
 13,276,000  
 23,089,000 

Other 
 1,666,000  
 1,695,000 

Total non-current assets 
 32,899,000  
 45,534,000 

Total assets 
$41,735,000  
$61,521,000 

 
See
accompanying notes to consolidated financial statements.
 

47
 

 


  
January 31, 

  
2024  
2023 

LIABILITIES AND STOCKHOLDERS’ EQUITY 
    
   

Current liabilities: 
    
   

Accounts payable 
$1,253,000  
$626,000 

Accrued expenses 
 2,023,000  
 3,265,000 

Current portion of term loan 
 1,500,000  
 750,000 

Deferred revenues 
 7,112,000  
 8,361,000 

Operating lease obligations 
 —  
 35,000 

Acquisition earnout liability 
 1,794,000  
 3,738,000 

Total current liabilities 
 13,682,000  
 16,775,000 

Non-current liabilities: 
    
   

Term loan, net of deferred financing costs 
 7,566,000  
 8,964,000 

Line of credit 
 1,500,000  
 — 

Deferred revenues, less current portion 
 173,000  
 167,000 

Other non-current liabilities 
 —  
 104,000 

Total non-current liabilities 
 9,239,000  
 9,235,000 

Total liabilities 
 22,921,000  
 26,010,000 

  
    
   

Commitments and contingencies – Note 12 
 -  
   

Stockholders’ equity 
    
   

Common stock, $0.01 par value per share, 85,000,000 shares authorized; 58,945,498 and 57,567,210 shares issued and outstanding, respectively 
 590,000  
 576,000 

Additional paid in capital 
 133,923,000  
 131,973,000 

Accumulated deficit 
 (115,699,000) 
 (97,038,000)

Total stockholders’ equity 
 18,814,000  
 35,511,000 

Total liabilities and stockholders’ equity 
$41,735,000  
$61,521,000 

 
See
accompanying notes to consolidated financial statements.
 

48
 


 
STREAMLINE
HEALTH SOLUTIONS, INC. AND SUBSIDIARIES
CONSOLIDATED
STATEMENTS OF OPERATIONS
 
(rounded
to the nearest thousand dollars, except share and per share information)
 


  
2023  
2022 

  
Fiscal Year 

  
2023  
2022 

Revenues: 
    
   

Software as a service 
$14,075,000  
$12,326,000 

Maintenance and support 
 4,318,000  
 4,483,000 

Professional fees and licenses 
 4,203,000  
 8,080,000 

Total revenues 
 22,596,000  
 24,889,000 

Operating expenses: 
    
   

Cost of software as a service 
 6,573,000  
 6,358,000 

Cost of maintenance and support 
 315,000  
 427,000 

Cost of professional fees and licenses 
 4,165,000  
 6,610,000 

Selling, general and administrative expense 
 14,710,000  
 16,283,000 

Research and development 
 5,704,000  
 6,042,000 

Impairment of goodwill 
 9,813,000  
 — 

Impairment of long-lived assets 
 963,000  
 — 

Total operating expenses 
 42,243,000  
 35,720,000 

Operating loss 
 (19,647,000) 
 (10,831,000)

Other income (expense): 
    
   

Interest expense 
 (1,071,000) 
 (749,000)

Acquisition earnout valuation adjustments 
 1,944,000  
 71,000 

Other 
 31,000  
 201,000 

Loss before income taxes 
 (18,743,000) 
 (11,308,000)

Income tax benefit (expense) 
 46,000  
 (71,000)

Net loss 
$(18,697,000) 
$(11,379,000)

  
    
   

Basic and Diluted Earnings Per Share 
$(0.33) 
$(0.23)

Weighted average number of common shares – basic and diluted 
 56,510,419  
 49,324,858 

 
See
accompanying notes to consolidated financial statements.
 

49
 


 
STREAMLINE
HEALTH SOLUTIONS, INC. AND SUBSIDIARIES
CONSOLIDATED
STATEMENTS OF CHANGES IN STOCKHOLDERS’ EQUITY
 
(rounded
to the nearest thousand dollars, except share information)
 


  
Common stock  
Common  
Additional paid in  
Accumulated  
Total stockholders’ 

  
shares  
stock  
capital  
deficit  
equity 

Balance at January 31, 2022 
 47,840,950  
 478,000  
 119,225,000  
 (85,659,000) 
 34,044,000 

Exercise of stock options 
 5,000  
 —  
 6,000  
 —  
 6,000 

Restricted stock issued 
 1,876,962  
 19,000  
 (19,000) 
 —  
 — 

Issuance of common stock 
 8,171,027  
 82,000  
 11,246,000  
 —  
 11,328,000 

Offering expenses 
 —  
 —  
 (52,000) 
 —  
 (52,000)

Restricted stock forfeited 
 (199,300) 
 (2,000) 
 2,000  
 —  
 — 

Surrender of stock 
 (127,429) 
 (1,000) 
 (196,000) 
 —  
 (197,000)

Share-based compensation expense 
 —  
 —  
 1,761,000  
 —  
 1,761,000 

Net loss 
 —  
 —  
 —  
 (11,379,000) 
 (11,379,000)

Balance at January 31, 2023 
 57,567,210  
$576,000  
$131,973,000  
$(97,038,000) 
$35,511,000 

Balance 
 57,567,210  
$576,000  
$131,973,000  
$(97,038,000) 
$35,511,000 

Restricted stock issued 
 1,947,738  
 20,000  
 (20,000) 
 —  
 — 

Restricted stock forfeited 
 (378,500) 
 (4,000) 
 4,000  
 —  
 — 

Surrender of stock 
 (190,950) 
 (2,000) 
 (278,000) 
 —  
 (280,000)

Adoption of ASU 2016-13 
 —  
 —  
 —  
 36,000  
 36,000 

Share-based compensation expense 
 —  
 —  
 2,244,000  
 —  
 2,244,000 

Net loss 
 —  
 —  
 —  
 (18,697,000) 
 (18,697,000)

Balance at January 31, 2024 
 58,945,498  
$590,000  
$133,923,000  
$(115,699,000) 
$18,814,000 

Balance 
 58,945,498  
$590,000  
$133,923,000  
$(115,699,000) 
$18,814,000 

 
See
accompanying notes to consolidated financial statements.
 

50
 


 
STREAMLINE
HEALTH SOLUTIONS, INC. AND SUBSIDIARIES
CONSOLIDATED
STATEMENTS OF CASH FLOWS
 
(rounded
to the nearest thousand dollars)
 


  
2023  
 2022 

  
Fiscal Year 

  
2023  
 2022 

Cash flows from operating activities: 
    
   

Net loss 
$(18,697,000) 
$(11,379,000)

Adjustments to reconcile net loss to net cash used in operating activities: 
    
   

Depreciation and amortization 
 4,331,000  
 4,313,000 

Acquisition earnout valuation adjustments 
 (1,944,000) 
 (71,000)

Provision for deferred income taxes 
 (104,000) 
 9,000 

Share-based compensation expense 
 2,102,000  
 1,680,000 

Impairment of goodwill 
 9,813,000  
 — 

Impairment of long-lived assets 
 963,000  
 — 

Provision for credit losses 
 (10,000) 
 189,000 

Changes in assets and liabilities: 
    
   

Accounts and contract receivables 
 3,708,000  
 (4,202,000)

Other assets 
 (401,000) 
 (1,197,000)

Accounts payable 
 544,000  
 (152,000)

Accrued expenses and other liabilities 
 (1,277,000) 
 1,069,000 

Deferred revenues 
 (1,243,000) 
 2,598,000 

Net cash used in operating activities 
 (2,215,000) 
 (7,143,000)

Cash flows from investing activities: 
    
   

Purchases of property and equipment 
 (54,000) 
 (10,000)

Capitalization of software development costs 
 (1,567,000) 
 (1,925,000)

Net cash used in investing activities 
 (1,621,000) 
 (1,935,000)

Cash flows from financing activities: 
    
   

Proceeds from issuance of common stock 
 —  
 8,316,000 

Payment of acquisition earnout liabilities 
 —  
 (2,012,000)

Payments for costs directly attributable to the issuance of common stock 
 —  
 (52,000)

Repayment of bank term loan 
 (750,000) 
 (250,000)

Proceeds from line of credit 
 1,500,000  
 — 

Payments related to settlement of employee shared-based awards 
 (280,000) 
 (197,000)

Payment of deferred financing costs 
 (44,000) 
 (20,000)

Other 
 2,000  
 6,000 

Net cash provided by financing activities 
 428,000  
 5,791,000 

Net decrease in cash and cash equivalents 
 (3,408,000) 
 (3,287,000)

Cash and cash equivalents at beginning of period 
 6,598,000  
 9,885,000 

Cash and cash equivalents at end of period 
$3,190,000  
$6,598,000 

  
    
   

Supplemental cash flow disclosures: 
    
   

Interest paid, net of amounts capitalized 
$989,000 
$651,000 

Income taxes paid 
$66,000 
$23,000 

 
See
accompanying notes to consolidated financial statements.
 

51
 

 


STREAMLINE
HEALTH SOLUTIONS, INC. AND SUBSIDIARIES
NOTES
TO CONSOLIDATED FINANCIAL STATEMENTS
 
January
31, 2024 and 2023
 
NOTE
1 — ORGANIZATION AND DESCRIPTION OF BUSINESS
 
Streamline
Health Solutions, Inc. and each of its wholly-owned subsidiaries, Streamline Health, LLC, Avelead Consulting, LLC, Streamline
Consulting Solutions, LLC and Streamline Pay & Benefits, LLC, (collectively, unless the context requires otherwise, “we”,
“us”, “our”, “Streamline”, or the “Company”) operates in one segment as a provider
of healthcare information technology solutions and associated services. The Company provides these capabilities through the
licensing of its Coding & CDI, eValuator coding analysis platform, RevID, and other workflow software applications and the use
of such applications by software as a service (“SaaS”). The Company also provides audit services to help clients
optimize their internal clinical documentation and coding functions, as well as implementation and consulting services to complement
its software solutions. The Company’s software and services enable hospitals and integrated healthcare delivery systems in the
United States and Canada to capture, store, manage, route, retrieve and process patient clinical, financial and other healthcare
provider information related to the patient revenue cycle.
 
Fiscal
Year
 
All
references to a fiscal year refer to the fiscal year commencing February 1 in that calendar year and ending on January 31 of the following
calendar year.
 
NOTE
2 — SIGNIFICANT ACCOUNTING POLICIES
 
Basis
of Presentation
 
The
consolidated financial statements include the accounts of Streamline Health Solutions, Inc. and its wholly-owned subsidiaries, Streamline
Health, LLC, Avelead Consulting, LLC, Streamline Consulting Solutions, LLC and Streamline Pay & Benefits, LLC. All significant intercompany
transactions and balances are eliminated in consolidation. All amounts in the consolidated financial statements, notes and tables have
been rounded to the nearest thousand dollars, except share and per share amounts, unless otherwise indicated.
 

The
Company has determined it has only one operating segment based on the guidance of ASC 280-10-50 paragraphs 1 through 8, The Company
has a sole chief operating decision maker who reviews a single set of financials, information, has accountability for the performance
of the organization, and allocates resources to drive success.
 
For
fiscal 2022, the Company had two reporting units for evaluation of goodwill: Streamline Solutions and Avelead Solutions. The Company
determined that, effective January 1, 2023, it has one reporting unit for purposes of evaluation of goodwill, which was used for evaluation
of goodwill for fiscal 2023. At the end of fiscal 2022, the Company consolidated and combined its operations for Streamline Solutions
and Avelead Solutions. For total assets at January 31, 2024 and 2023 and total revenue and net loss for the fiscal years ended January
31, 2024 and 2023, see our consolidated financial statements included in Part II, Item 8, “Financial Statements and Supplementary
Data” herein.
 
Going
Concern
 
The
Company’s financial statements are prepared on a going concern basis, which contemplates the realization of assets and the satisfaction
of obligations in the normal course of business.
 
In
the Company’s Quarterly Report on Form 10-Q for the period ended October 31, 2023, the Company raised substantial doubt about
its ability to continue as a going concern. It cited the “ability to achieve cash from operations and raise additional debt or
equity capital to fund its ongoing operations” as requirements to mitigate the substantial doubt. As of this filing, the
Company has been able to successfully implement a cost reduction plan, obtain additional capital, and restructure the covenants for
its existing credit facility. Collectively, these initiatives alleviated the substantial doubt about the Company’s ability to continue as a going concern. Refer to the
“Restructuring” subtopic of this Note 1 (Organization and Description of Business) and Note 14 – Subsequent Events
to our consolidated financial statements included in Part II, Item 8, “Financial Statements and Supplementary Data” for
additional information.
 

52
 

 
Reclassification
 
Certain
amounts for fiscal 2022 were reclassified to conform to the current period classification. The Company incurred certain acquisition-related
costs related to the acquisition of Avelead totaling $149,000 consisting primarily of professional service fees. The aforementioned acquisition-related
costs for fiscal 2022 were previously presented in a separate, single caption and are now included in selling, general, and administrative
expense in the accompanying condensed consolidated statements of operations, which is consistent with the presentation for the current
period.
 
Use
of Estimates
 
The
preparation of financial statements in conformity with U.S. generally accepted accounting principles (“GAAP”) requires management
to make estimates and assumptions that affect the amounts reported in the financial statements and accompanying notes. On an ongoing
basis, management evaluates its estimates and judgments, including those related to the recognition of revenue, stock-based compensation,
capitalization of software development costs, intangible assets, the allowance for credit losses, contingent consideration and income
taxes. Actual results could differ from those estimates.
 
Cash
and Cash Equivalents
 
Financial
instruments that potentially subject the Company to concentrations of credit risk consist principally of cash demand deposits. Cash deposits
are placed in Federal Deposit Insurance Corporation (“FDIC”) insured financial institutions. Cash deposits may exceed FDIC
insured levels from time to time. For purposes of the consolidated balance sheets and consolidated statements of cash flows, the Company
considers all highly liquid investments purchased with an original maturity of three months or less to be cash equivalents.
 
Non-Cash
Items
 
The
Company had the following items that were non-cash items related to the consolidated statements of cash flows:
 SCHEDULE
OF NON-CASH ITEMS RELATED TO CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS


  
2023  
2022 

  
Fiscal Year 

  
2023  
2022 

Payment of acquisition earnout liabilities in restricted common stock 
 —  
 3,012,000 

Capitalized software purchased with stock (See Note 12) 
 140,000  
 81,000 

Deferred financing costs 
 83,000  
 — 

 
Receivables
 
Accounts
and contract receivables are comprised of amounts owed to the Company for licensed software, professional services, including coding
audit services, consulting services, maintenance services, and software as a service and are presented net of the allowance for credit losses. The timing of revenue recognition may not coincide with the billing terms of the client contract, resulting in unbilled receivables
or deferred revenues; therefore, certain contract receivables represent revenues recognized prior to client billings. Individual contract
terms with clients or resellers determine when receivables are due. Accounts receivable represent amounts that the entity has an unconditional
right to consideration. For billings where the criteria for revenue recognition have not been met, deferred revenue is recorded until
the Company satisfies the respective performance obligations.
 
Allowance
for Credit Losses
 
The
Company adjusts accounts receivable down to net realizable value. Effective February 1, 2023, the Company implemented ASC 326-10,
Financial Instruments—Credit Losses (Topic 326): Measurement of Credit Losses on Financial Instruments (“CECL”).
CECL provides the framework for the Company to evaluate its allowance for credit losses. In determining the
allowance for credit losses, the Company established a historical credit loss rate adjusted for a premium, addressing any
prospective changes to the risk of credit loss, that is applied against current sales. The Company evaluates individual receivables
based upon the most recent information available and the status of any open or unresolved issues with the client preventing the
payment thereof. Corrective action, if necessary, is taken by the Company to resolve open issues related to unpaid receivables.
During these periodic reviews, significant judgement is required for the Company to determine the appropriate allowances for
doubtful accounts for estimated losses resulting from the unwillingness of its clients or resellers to make required payments. The
Company believes its reserve is adequate, however, results may differ in future periods.
 


53
 

 
The
following table summarizes the changes to the allowance account with the adoption of CECL:

 SCHEDULE
OF RESERVE RESULTS IN FUTURE PERIODS


  
January 31, 2023  
CECL Adoption 
 Provision adjustments
 
Write-offs & Recoveries  
January 31, 2024 

Allowance for credit losses 
$132,000  
$(36,000)
 $
(10,000
) 
$—  
$86,000 

 
Accrued
Expenses
 
Accrued
expenses consisted of the following:
 SCHEDULE
OF ACCRUED EXPENSES



  
2024  
2023 

  
January 31, 

  
2024  
2023 

Employee benefits and related compensation 
$ 1,071,000  
$2,079,000 

Professional fees and services 
 389,000  
 294,000 

Third party licenses 
 43,000  
 285,000 

Customer concessions 
 233,000  
 226,000 

State income and sales taxes payable 
 226,000  
 331,000 

Interest, primarily on term loan 
 61,000  
 50,000 

Total accrued expenses 
$ 2,023,000  
$3,265,000 


 

Concessions
Accrual
 
The
Company offers certain service level agreements within its client contracts such as uptime, support hours, and levels of support. Our
contracts may include, and we may offer, credits to clients when these service line agreements are not met. The service level agreements
are accounted for as variable consideration using a portfolio approach. As a result, we record an estimate of these concessions against
our recorded revenue. In determining the concessions accrual, the Company evaluates historical concessions granted relative to revenue
as well as future potential risk that these service level agreements will not be met. The Company records a provision, reducing revenue,
for the estimated amount of concessions incurred on the revenue recorded. The Company evaluates the amount of the concession accrual
each period for adequacy. Historically, concessions have not been significant. The concession accrual included in accrued expenses on
the Company’s consolidated balance sheet was $233,000 and $226,000 as of January 31, 2024 and 2023, respectively.
 
Property
and Equipment
 
Property
and equipment are stated at cost. Depreciation is computed using the straight-line method, over the estimated useful lives of the related
assets. Estimated useful lives are as follows:
 SCHEDULE
OF ESTIMATED USEFUL LIFE OF PROPERTY AND EQUIPMENT



Computer
    equipment and software
 
3-4
    years

Office
    equipment
 
5
    years

Office
    furniture and fixtures
 
5-7
    years

Leasehold
    improvements
 
Term
    of lease or estimated useful life, whichever is shorter

 
Depreciation
expense for property and equipment in fiscal 2023 and 2022 was $45,000 and $54,000, respectively.
 
Normal
repairs and maintenance are expensed as incurred. Replacements are capitalized and the property and equipment accounts are relieved of
the items being replaced or disposed of, if no longer of value. The related cost and accumulated depreciation of the disposed assets
are eliminated and any gain or loss on disposition is included in the results of operations in the year of disposal.
 


54
 

 

Leases
 
We
determine whether an arrangement is a lease at inception. Right-of-use assets represent our right to use an underlying asset for the
lease term, and lease liabilities represent our obligation to make lease payments arising from the lease.
 
Operating
lease right-of-use assets and liabilities are recognized at commencement date based on the present value of lease payments over the expected
lease term. Right-of-use assets represent our right to use an underlying asset for the lease term and lease liabilities represent our
obligation to make lease payments arising from the lease. Since our lease arrangements do not provide an implicit rate, we use our estimated
incremental borrowing rate for the expected remaining lease term at commencement date in determining the present value of future lease
payments. We recognize operating lease cost on a straight-line basis by aggregating any rent abatement with the total expected rental
payments and amortizing the expense ratably over the term of the lease. Sublease income is recognized as other income over the period
of the lease, as the sublease is outside of the Company’s normal business operations. See Note 4 – Operating Leases for further
details.
 
Debt
Issuance Costs
 
Cost
related to the Second Amended and Restated Loan and Security Agreement (as amended and modified, the “Loan Agreement”)
with Western Alliance Bank (“WAB”) was capitalized and amortized to interest expense on a straight-line basis, which is not materially different
from the effective interest method, over the term of the related debt, and presented on the Company’s consolidated balance sheets
as a direct deduction from the carrying amount of the non-current portion of our term loan.
 
Impairment
of Long-Lived Assets
 
The
Company reviews the carrying value of long-lived assets for impairment whenever facts and circumstances exist that would suggest that
assets might be impaired or that the useful lives should be modified. Among the factors the Company considers in making the evaluation
are changes in market position and profitability. If facts and circumstances are present which may indicate that the carrying amount
of the assets may not be recoverable, the Company will prepare a projection of the undiscounted cash flows of the specific asset or asset
group and determine if the long-lived assets are recoverable based on these undiscounted cash flows. If impairment is indicated, an adjustment
will be made to reduce the carrying amount of these assets to their fair values. For fiscal 2023, an impairment of long-lived assets
in the amount of $963,000 was recorded. Refer to Note 6 – Goodwill and Intangible Assets to our consolidated financial statements
included in Part II, Item 8, “Financial Statements and Supplementary Data” for additional information.
 
Capitalized
Software Development Costs
 
Software
development costs for software to be sold, leased, or marketed are accounted for in accordance with ASC 985-20, Software — Costs
of Software to be Sold, Leased or Marketed. Costs associated with the planning and design phase of software development are classified
as research and development costs and are expensed as incurred. Once technological feasibility has been established, a portion of the
costs incurred in development, including coding, testing and quality assurance, are capitalized until available for general release to
clients, and subsequently reported at the lower of unamortized cost or net realizable value. Amortization is calculated on a solution-by-solution
basis and is included in cost of professional fees and licenses on the consolidated statements of operations. Annual amortization is
measured at the greater of (i) the ratio of the software product’s current gross revenues to the total of current and expected
gross revenues or (ii) straight-line over the remaining economic life of the software (typically two years). Unamortized capitalized
costs determined to be in excess of the net realizable value of a solution are expensed at the date of such determination. Capitalized
software development costs for software to be sold, leased, or marketed, net of accumulated amortization, totaled $287,000 and $522,000
as of January 31, 2024 and 2023, respectively.
 

55
 


 
Internal-use
software development costs are accounted for in accordance with ASC 350-40, Internal-Use Software. The costs incurred in the preliminary
stages of development are expensed as research and development costs as incurred. Once an application has reached the development stage,
internal and external costs incurred to develop internal-use software are capitalized and amortized on a straight-line basis over the
estimated useful life of the software (typically three to four years). Maintenance and enhancement costs, including those costs in the
post-implementation stages, are typically expensed as incurred, unless such costs relate to substantial upgrades and enhancements to
the software that result in added functionality, in which case the costs are capitalized and amortized on a straight-line basis over
the estimated useful life of the software. The Company reviews the carrying value for impairment whenever facts and circumstances exist
that would suggest that assets might be impaired or that the useful lives should be modified. Amortization expense related to capitalized
internal-use software development costs is included in Cost of software as a service on the consolidated statements of operations. Capitalized
software development costs for internal-use software, net of accumulated amortization, totaled $5,511,000 and $5,324,000 as of January
31, 2024 and 2023, respectively.
 
The
estimated useful lives of software (including software to be sold and internal-use software) are reviewed frequently and adjusted as
appropriate to reflect upcoming development activities that may include significant upgrades and/or enhancements to the existing functionality.
The Company reviews, on an on-going basis, the carrying value of its capitalized software development expenditures, net of accumulated
amortization.
 
Amortization
expense on all capitalized software development was $2,463,000 and
$2,423,000 in
fiscal 2023 and 2022, respectively. Further, the Company recognized an impairment of approximately $18,000 and
$0 in
fiscal 2023 and fiscal 2022, respectively, related to cancelled or abandoned enhancement projects during fiscal 2023 and fiscal 2022
that have been recognized within amortization expense. Additionally, in fiscal 2023, entries of approximately $18,000 for
fully amortized and abandoned assets were offset from their corresponding capitalization and
accumulated amortization balance sheet accounts.
 
The
Company uses the “carry-over” method for amortizing capitalized software development costs. Under the “carry-over”
method, the costs of the enhancements are added to the unamortized costs of the previous version of the product and the combined amount
is amortized over the remaining useful life of the product. Including unamortized cost of the original product with the cost of the enhancement
for purposes of applying the net realizable value test and amortization provisions is consistent with accounting guidance for software
companies that improve their software and discontinue selling or marketing the older versions.

 SCHEDULE
OF AMORTIZATION EXPENSE FOR INTERNALLY DEVELOPED SOFTWARE


  
2023  
2022 

  
Fiscal Year 

  
2023  
2022 

Amortization expense on internally-developed software included in: 
    
   

Cost of software as a service 
$2,229,000  
$2,068,000 

Cost of professional fees and licenses 
 234,000  
 355,000 

Total amortization expense on internally-developed software 
$2,463,000  
$2,423,000 

 
The
interest capitalized to software development cost reduces the Company’s interest expense recognized in the consolidated statements
of operations.
 
Research
and development expense was $5,704,000 and $6,042,000 in fiscal 2023 and 2022, respectively.
 

56
 

 
Fair
Value of Financial Instruments
 
The
FASB’s authoritative guidance on fair value measurements establishes a framework for measuring fair value and expands
disclosure about fair value measurements. This guidance enables the reader of the financial statements to assess the inputs used to
develop those measurements by establishing a hierarchy for ranking the quality and reliability of the information used to determine
fair values. Under this guidance, assets and liabilities carried at fair value must be classified and disclosed in one of the
following three categories:
 
Level
1: Quoted market prices in active markets for identical assets or liabilities.
 
Level
2: Observable market-based inputs or unobservable inputs that are corroborated by market data.
 
Level
3: Unobservable inputs that are not corroborated by market data.
 
The
carrying amounts of cash and cash equivalents, accounts receivable, accounts payable and accrued expenses approximate fair value based
on the short-term maturity of these instruments. Cash and cash equivalents are classified as Level 1. For fiscal 2023 and 2022,
there were no transfers of assets or liabilities between Levels 1, 2, or 3.
 
The
table below provides information on our liabilities that are measured at fair value on a recurring basis:
 SCHEDULE
OF FAIR VALUE ASSETS AND LIABILITIES MEASURED ON RECURRING BASIS



  
Total Fair  
Quoted Prices in Active Markets  
Significant Other Observable Inputs  
Significant Unobservable Inputs 

  
Value  
(Level 1)  
(Level 2)  
(Level 3) 

At January 31, 2024 
    
    
    
   

Acquisition earnout liability (1) 
$1,794,000  
$ —  
$—  
$1,794,000 

At January 31, 2023 
    
    
    
   

Acquisition earnout liability (1) 
$3,738,000  
$—  
$—  
$3,738,000 

 


(1)
The
    fair value of the acquisition earnout liability is based upon a probability-weighted discounted cash flow that was completed at the
    date of acquisition and updated as of January 31, 2024. The change in the fair value of the acquisition earnout liability decreased
    $1,944,000 for the year ended January 31, 2024, which is entirely recognized in “Acquisition earnout valuation adjustments”
    in the accompanying consolidated statement of operations.

 
 

 
The
    probability-weighted discounted cash flow is calculated using a Monte Carlo valuation method. The valuation model provides numerous
    outcomes. The outcomes are averaged and discounted to present value, which provides the current value point estimate. The significant
    inputs include our forecast of Avelead SaaS revenue, the probabilities associated with each of (i) a change in control or (ii) a
    certain client termination, as well as other normal and customary inputs to financial models, including but not limited to, risk
    factors and interest rates.

 
The
fair value of the Company’s term loan under its Loan Agreement was determined through an analysis of the interest rate spread from
the date of closing the loan (August 2021) to the date of the most recent balance sheets, January 31, 2024 and January 31, 2023. The
term loan bears interest at a per annum rate equal to the Prime Rate (as published in The Wall Street Journal) plus 1.5%, with a Prime
“floor” rate of 3.25%. The prime rate is variable and, thus accommodates changes in the market interest rate. However, the
interest rate spread (the 1.5% added to the Prime Rate) is fixed. We estimated the impact of the changes in the interest rate spread
by analogizing the effect of the change in the Corporate bond rates, reduced for any changes in the market interest rate. This provided
us with an estimated change to the interest rate spread of approximately 0.5% from the date we entered the debt agreement to January
31, 2024 and January 31, 2023. The fair value of the debt as of January 31, 2024 and January 31, 2023 was estimated to be $8,807,000
and $9,550,000, respectively, or a discount to book value of $193,000 and $200,000, respectively. The fair value of the line of credit
as of January 31, 2024 was estimated to be $1,463,000, or a discount to book value of $37,000. The fair value of long-term debt was estimated using Level 2 inputs.
 

57
 

 

Revenue
Recognition
 
We
derive revenue from the sale of internally-developed software, either by licensing for local installation or by a SaaS delivery model,
through our direct sales force or through third-party resellers. Licensed, locally-installed clients on a perpetual model utilize our
support and maintenance services for a separate fee, whereas term-based locally installed license fees and SaaS fees include support
and maintenance. We also derive revenue from professional services that support the implementation, configuration, training and optimization
of the applications, as well as audit services and consulting services.
 
We
recognize revenue in accordance with Accounting Standards Codification (ASC) 606, Revenue from Contracts with Clients (“ASC
606”), under the core principle of recognizing revenue to depict the transfer of promised goods or services to clients in an amount
that reflects the consideration to which the entity expects to be entitled in exchange for those goods or services.
 
We
commence revenue recognition (Step 5 below) in accordance with that core principle after applying the following steps:
 


 
●
Step
    1: Identify the contract(s) with a client

 
 
 

 
●
Step
    2: Identify the performance obligations in the contract

 
 
 

 
●
Step
    3: Determine the transaction price

 
 
 

 
●
Step
    4: Allocate the transaction price to the performance obligations in the contract

 
 
 

 
●
Step
    5: Recognize revenue when (or as) the entity satisfies a performance obligation

 
Often
contracts contain more than one performance obligation. Performance obligations are the unit of accounting for revenue recognition and
generally represent the distinct goods or services that are promised to the client. Revenue is recognized net of any taxes collected
from clients and subsequently remitted to governmental authorities.
 
If
we determine that we have not satisfied a performance obligation, we defer recognition of the revenue until the performance obligation
is satisfied. Maintenance and support and SaaS agreements are generally non-cancellable or contain significant penalties for early cancellation,
although clients typically have the right to terminate their contracts for cause if we fail to perform material obligations. However,
if non-standard acceptance periods, non-standard performance criteria, or cancellation or right of refund terms are required, revenue
is recognized upon the satisfaction of such criteria.
 
The
transaction price is determined by summing all the consideration the Company expects to receive from the client under the contract. At
times, a contract may have variable attributes (i.e., performance guarantees, service level agreements, optional terms) that the Company
must consider when establishing the transaction price to mitigate significant revenue reversals for the contract. The determined transaction
price is allocated based on the standalone selling price (“SSP”) of the performance obligations in contract. Significant
judgment is required to determine the SSP for each performance obligation, inclusion of variable consideration, the amount allocated
to each performance obligation and whether it depicts the amount that the Company expects to receive in exchange for the related product
and/or service. The Company recognizes revenue for implementation of its eValuator SaaS solution over the contract term, as it has been
determined that those implementation services are not a distinct performance obligation. Services for other SaaS and Software solutions
such as CDI, RevID and Compare, have been determined as a distinct performance obligation. For these agreements, the Company estimates
SSP of its software licenses using the residual approach when the software license is sold with other services and observable SSPs exist
for the other services. The Company estimates the SSP for maintenance, professional services, software as a service and audit services
based on observable standalone sales. 
 

58
 

 

Contract
Combination
 
The
Company may execute more than one contract or agreement with a single client. The Company evaluates whether the agreements were negotiated
as a package with a single objective, whether the amount of consideration to be paid in one agreement depends on the price and/or performance
of another agreement, or whether the goods or services promised in the agreements represent a single performance obligation. The conclusions
reached can impact the allocation of the transaction price to each performance obligation and the timing of revenue recognition related
to those arrangements.
 
The
Company has utilized the portfolio approach as the practical expedient. We have applied the revenue model to a portfolio of contracts
with similar characteristics where we expected that the financial statements would not differ materially from applying it to the individual
contracts within that portfolio. 
 
Software
Licenses
 
The
Company’s software license arrangements provide the client with the right to use functional intellectual property. Implementation,
support, and other services are typically considered distinct performance obligations when sold with a software license unless these
services are determined to significantly modify the software. Revenue is recognized at a point in time. Typically, this is upon shipment
of components or electronic download of software.
 
Maintenance
and Support Services
 
Our
maintenance and support obligations include multiple discrete performance obligations, with the two largest being unspecified product
upgrades or enhancements, and technical support, which can be offered at various points during a contract period. We believe that the
multiple discrete performance obligations within our overall maintenance and support obligations can be viewed as a single performance
obligation since both the unspecified upgrades and technical support are activities to fulfill the maintenance performance obligation
and are rendered concurrently. Maintenance and support agreements entitle clients to technology support, version upgrades, bug fixes
and service packs. We recognize maintenance and support revenue over the contract term.
 
Software-Based
Solution Professional Services
 
The
Company provides various professional services to clients with software licenses. These include project management, software implementation
and software modification services. Revenues from arrangements to provide professional services are generally distinct from the other
promises in the contract and are recognized as the related services are performed. Consideration payable under these arrangements is
either fixed fee or on a time-and-materials basis and is recognized over time as the services are performed.
 
Software
as a Service
 
SaaS-based
contracts include a right to use of the Company’s platform and support which represent a single promise to provide continuous access
to its software solutions. Implementation services for the Company’s eValuator product are included as part of the single promise
for its respective contracts. The Company recognizes revenue for implementation of the eValuator product over the contract term as it
is determined that the implementation on eValuator is not a distinct performance obligation. Implementation services for other SaaS products
are deemed to be separate performance obligations that are recognized over time as the services are performed.
 
Audit
Services
 
The
Company provides technology-enabled coding audit services to help clients review and optimize their internal clinical documentation and
coding functions across the applicable segment of the client’s enterprise. Audit services are a separate performance obligation.
We recognize revenue over time as the services are performed.
 
Disaggregation
of Revenue
 
The
following table provides information about disaggregated revenue by type and nature of revenue stream:
 SCHEDULE
OF DISAGGREGATON OF REVENUE


  
2023  
2022 

  
Fiscal Year 

  
2023  
2022 

Over time revenue 
$22,358,000  
$23,670,000 

Point in time revenue 
 238,000  
 1,219,000 

Total revenue 
$22,596,000  
$24,889,000 

 

59
 

 

The
Company includes revenue categories of (i) over time and (ii) point in time revenue. The Company includes revenue categories of (i) SaaS,
(ii) maintenance and support, (iii) professional services, and (iv) audit services as over time revenue. For point in time revenue, the
performance obligation is recognized as the point in time when the obligation is fully satisfied. The Company includes software licenses
as point in time revenue.
 
Contract
Assets and Deferred Revenues
 
The
Company receives payments from clients based upon contractual billing schedules. Contract receivables include amounts related to the
Company’s contractual right to consideration for completed performance obligations not yet invoiced. Deferred revenues include
payments received in advance of performance under the contract. Our contract receivables and deferred revenue are reported on an individual
contract basis at the end of each reporting period. Contract receivables are classified as current or noncurrent based on the timing
of when we expect to bill the client. Deferred revenue is classified as current or noncurrent based on the timing of when we expect to
recognize revenue. In the year ended January 31, 2024, we recognized approximately $7,642,000 in revenue from deferred revenues outstanding
as of January 31, 2023. Revenue allocated to remaining performance obligations was $31,414,000   as of January 31, 2024, of
which the Company expects to recognize approximately 46% over the next 12 months and the remainder thereafter.
 
Deferred
costs (costs to fulfill a contract and contract acquisition costs)
 
We
defer the direct costs, which include salaries and benefits, for professional services related to SaaS contracts as a cost to fulfill
a contract. These deferred costs will be amortized on a straight-line basis over the contractual term. As of January 31, 2024, and 2023,
we had deferred costs of $77,000 and $94,000, respectively, net of accumulated amortization of $102,000 and $176,000, respectively. Amortization
expense of these costs was $82,000 and $83,000 in fiscal 2023 and 2022, respectively. There were no impairment losses for these capitalized
costs for the fiscal 2023 and 2022. Additionally, in fiscal 2023, approximately $155,000 of fully amortized contracts were cleared
from their corresponding capitalization and accumulated amortization balance sheet accounts, while no such adjustments were made in fiscal
2022.
 
Contract
acquisition costs, which consist of sales commissions paid or payable, is considered incremental and recoverable costs of obtaining a
contract with a client. Sales commissions for initial and renewal contracts are deferred and then amortized on a straight-line basis
over the contract term. As a practical expedient, we expense sales commissions as incurred when the amortization period of related deferred
commission costs would have been one year or less.
 
Deferred
commissions costs paid and payable, which are included on the consolidated balance sheets within other non-current assets totaled $1,461,000
and $1,534,000, respectively, as of January 31, 2024 and 2023. In fiscal 2023 and 2022, amortization expense associated with deferred
sales commissions was $588,000 and $411,000, respectively, and was included in selling, general and administrative expenses on the consolidated
statements of operations. There were $35,000 and no impairment losses for these capitalized costs that was included with the amortization
expense for fiscal 2023 and 2022.
 
Concentrations
 
Financial
instruments, which potentially expose the Company to concentrations of credit risk, consist primarily of accounts receivable. The Company’s
accounts receivables are concentrated in the healthcare industry. However, the Company’s clients typically are well-established
hospitals, medical facilities or major health information systems companies with good credit histories that resell the Company’s
solutions. Payments from clients have been received within normal time frames for the industry. However, some hospitals and medical facilities
have experienced significant operating losses as a result of limits on third-party reimbursements from insurance companies and governmental
entities and extended payment of receivables from these entities is not uncommon.
 
To
date, the Company has relied on a limited number of clients and remarketing partners for a substantial portion of its total revenues.
The Company expects that a significant portion of its future revenues will continue to be generated by a limited number of clients and
its remarketing partners. 
 

60
 

 

Goodwill
and Intangible Assets
 
Goodwill
and other intangible assets were recognized in conjunction with the Avelead acquisition, and certain other acquisitions from fiscal
2013 and prior (prior to divestiture of such assets). Identifiable intangible assets include purchased intangible assets with finite
lives, which primarily consist of internally-developed software and client relationships. Finite-lived purchased intangible assets
are amortized over their expected period of benefit, which generally ranges from one
to 15
years, using the straight-line method.
 
The
Company assesses the useful lives and possible impairment of intangible assets when an event occurs that may trigger such a review. Factors
considered important which could trigger a review include:
 


 
●
significant
    underperformance relative to historical or projected future operating results;

 
 
 

 
●
significant
    changes in the manner of use of the acquired assets or the strategy for the overall business;

 
 
 

 
●
identification
    of other impaired assets within a reporting unit;

 
 
 

 
●
disposition
    of a significant portion of an operating segment;

 
 
 

 
●
significant
    negative industry or economic trends;

 
 
 

 
●
significant
    decline in the Company’s stock price for a sustained period; and

 
 
 

 
●
a
    decline in the market capitalization relative to the net book value.

 
Determining
whether a triggering event has occurred involves significant judgment by the Company.
 
The
Company assesses goodwill annually (as of November 1), or more frequently when events and circumstances, such as the ones mentioned above,
occur indicating that the recorded goodwill may be impaired. In assessing qualitative factors to determine whether it is more likely
than not that the fair value of a reporting unit is less than its carrying amount, the Company assesses relevant events and circumstances
that may impact the fair value and the carrying amount of a reporting unit. The identification of relevant events and circumstances and
how these may impact a reporting unit’s fair value or carrying amount involve significant judgments by management. These judgments
include the consideration of macroeconomic conditions, industry and market considerations, cost factors, overall financial performance,
events which are specific to the Company and trends in the market price of the Company’s common stock. Each factor is assessed
to determine whether it impacts the impairment test positively or negatively, and the magnitude of any such impact.
 
During
the year ended January 31, 2023, the Company did not note any of the above qualitative factors, which would be considered a triggering
event for goodwill impairment. During the year ended January 31, 2024, the Company identified one or more factors that triggered goodwill
impairment as of October 31, 2023, as described below.
 
In
the third quarter of fiscal 2023, the Company received a notice from a significant SaaS client of its intent not to renew its contract
following the expiration of the current term on December 31, 2023. At that time, the Company elected to accelerate the execution of the
2023 Restructuring that was designed to reduce costs while maintaining the Company’s ability to expand its SaaS business. Both
the client termination and the execution of the Strategic Restructuring were announced on October 16, 2023. Following these announcements,
the Company’s share price declined significantly. Based on these events (collectively, the “Triggering Events”), the
Company identified indicators of possible impairment and initiated testing using a valuation date of October 31, 2023. The impairment
tests were conducted under guidance of ASC Topic 360, Impairment and Disposal of Long-Lived Assets (“ASC 360”) for certain
long-lived assets, including capitalized contract costs, developed technology, client relationships and trade names, and in accordance
with ASC Topic 350, Intangibles – Goodwill and Other (“ASC 350”) with respect to the reporting unit’s goodwill.
 

61
 


 
Reporting
units are determined based on the organizational structure the entity has in place at the date of the impairment test. A reporting unit
is an operating segment or component business unit with the following characteristics: (a) it has discrete financial information, (b)
segment management regularly reviews its operating results (generally an operating segment has a segment manager who is directly accountable
to and maintains regular contact with the chief operating decision maker to discuss operating activities, financial results, forecasts
or plans for the segment), and (c) its economic characteristics are dissimilar from other units (this contemplates the nature of the
products and services, the nature of the production process, the type or class of client for the products and services and the methods
used to distribute the products and services). The Company determined that for fiscal 2023 it has one operating segment and one reporting
unit, while for fiscal 2022 it had one operating segment and two reporting units.
 
The
Company estimates the fair value of its reporting unit using a combination of the market approach and income approach, via
discounted cash flow valuation models which include, but are not limited to, assumptions such as a “risk-free” rate of
return on an investment, the weighted average cost of capital of a market participant and future revenue, operating margin, working
capital and capital expenditure trends. Determining the fair value of reporting units and goodwill includes significant judgment by
management, and different judgments could yield different results.
 
The
Company performed its annual goodwill assessment for fiscal 2023 as of October 31, 2023 using the approaches described above. The
assessment identified a goodwill impairment of $9,813,000 that was recorded. Based on the analysis performed for fiscal 2022, the fair
value of the reporting units exceeded the carrying amount of the reporting unit, including goodwill, and, therefore, a goodwill impairment
loss was not recognized.   Refer to Note 6 – Goodwill and Intangible Assets to our consolidated financial statements included
in Part II, Item 8, “Financial Statements and Supplementary Data” for additional information.
 
Equity
Awards
 
The
Company accounts for share-based payments based on the grant-date fair value of the awards with compensation cost recognized as
expense over the requisite service period. For awards to non-employees, the Company recognizes compensation expense in the same
manner as if the entity had paid cash for the goods or services. The Company incurred total annual compensation expense related to
stock-based awards of $2,102,000
in fiscal 2023, net of $140,000
of capitalized non-employee stock compensation, and $1,680,000
net of $81,000 of capitalized non-employee stock compensation, in fiscal 2022.
 
The
fair value of the stock options granted are estimated at the date of grant using a Black-Scholes option pricing model. Option pricing
model input assumptions such as expected term, expected volatility and risk-free interest rate impact the fair value estimate. The Company
recognizes forfeitures as they occur. These assumptions are subjective and are generally derived from external (such as, risk-free rate
of interest) and historical data (such as, volatility factor, expected term and forfeiture rates). Future grants of equity awards accounted
for as stock-based compensation could have a material impact on reported expenses depending upon the number, value and vesting period
of future awards.
 
The
Company issues restricted stock awards in the form of Company common stock. The fair value of these awards is based on the market
close price per share on the grant date. The Company expenses the compensation cost of these awards as the restriction period
lapses, which is typically a one- to four-year service period to the Company. In fiscal 2023 and 2022, 190,950
and 127,429
shares of common stock were surrendered to the Company to satisfy tax withholding obligations totaling $280,000
and $197,000,
respectively, in connection with the vesting of restricted stock awards. Shares surrendered by the restricted stock award recipients
in accordance with the applicable plan are deemed cancelled, and therefore are not available to be reissued. The Company awarded 1,203,621
and 890,731
shares of restricted stock to its executive officers and directors of the Company in fiscal 2023 and 2022, respectively.
 
Income
Taxes
 
Income
taxes are accounted for under the asset and liability method. Deferred tax assets and liabilities are recognized for the future tax consequences
attributable to differences between the financial statement carrying amounts of existing assets and liabilities and their respective
tax bases and for tax credit and loss carry-forwards. Deferred tax assets and liabilities are measured using enacted tax rates expected
to apply to taxable income in the years in which those temporary differences are expected to be recovered or settled. In assessing net
deferred tax assets, the Company considers whether it is more likely than not that some or all of the deferred tax assets will not be
realized. The Company establishes a valuation allowance when it is more likely than not that all or a portion of deferred tax assets
will not be realized. Refer to Note 7 – Income Taxes to our consolidated financial statements included in Part II, Item 8, “Financial
Statements and Supplementary Data” for further details.
 

62
 

 

The
Company provides for uncertain tax positions and the related interest and penalties based upon management’s assessment of whether
certain tax positions are more likely than not to be sustained upon examination by tax authorities. At January 31, 2024, the Company
believes it has appropriately accounted for any uncertain tax positions.
 
Net
Earnings (Loss) Per Common Share
 
The
Company presents basic and diluted earnings per share (“EPS”) data for our common stock.
 
Our
unvested restricted stock awards are considered non-participating securities because holders are not entitled to non-forfeitable rights
to dividends or dividend equivalents during the vesting term. In accordance with ASC 260, securities are deemed not to be participating
in losses if there is no obligation to fund such losses. Diluted EPS for our common stock is computed using the treasury stock method.
 
The
following is the calculation of the basic and diluted net loss per share of common stock:
 SCHEDULE
OF BASIC AND DILUTED NET LOSS PER SHARE OF COMMON STOCK


  
2023  
2022 

  
Fiscal Year 

  
2023  
2022 

Basic earnings (loss) per share: 
    
   

Loss, net of tax 
$(18,697,000) 
$(11,379,000)

Basic net loss per share of common stock  
$(0.33) 
$(0.23)

  
    
   

Diluted earnings (loss) per share (1): 
    
   

Loss available to common stockholders  
$(18,697,000) 
$(11,379,000)

Diluted net loss per share of common stock  
$(0.33) 
$(0.23)

  
    
   

Net loss 
$(18,697,000) 
$(11,379,000)

  
    
   

Weighted average shares outstanding – Basic (1)(1) 
 56,510,419  
 49,324,858 

Effect of dilutive securities - Stock options and Restricted stock (2)(2) 
 —  
 — 

Weighted average shares outstanding – Diluted 
 56,510,419  
 49,324,858 

Basic and diluted net loss per share of common stock 
$(0.33) 
$(0.23)

 


 
(1)
Excludes
    the effect of unvested restricted shares of common stock, which are considered non-participating securities. As of January 31, 2024
    and 2023, there were 1,970,521 and 1,848,031 unvested restricted shares of common stock, respectively.

 
 
 

 
(2)
Diluted
    net loss per share excludes the effect of shares that are anti-dilutive. As of January 31, 2024, there were 67,500 outstanding stock
    options and 1,970,521 unvested restricted shares of common stock. As of January 31, 2023, there were 628,598 outstanding stock options
    and 1,848,031 unvested restricted shares of common stock.

 


63
 

 
Loss
Contingencies
 
We
are subject to the possibility of various loss contingencies arising in the normal course of business. We consider the likelihood of
the loss or impairment of an asset or the incurrence of a liability as well as our ability to reasonably estimate the amount of loss
in determining loss contingencies. An estimated loss contingency is accrued when it is probable that a liability has been incurred or
an asset has been impaired, and the amount of loss can be reasonably estimated. We regularly evaluate current information available to
us to determine whether to accrue for a loss contingency and adjust any previous accrual.
 
Restructuring
 
On
October 16, 2023, the Company announced it was executing a Strategic Restructuring designed to reduce expenses while maintaining the
Company’s ability to expand its SaaS business. The Strategic Restructuring initiatives included a reduction in force, resulting
in the termination of 26 employees, or approximately 24% of the Company’s workforce. To execute the Strategic Restructuring, the
Company incurred one-time restructuring costs associated with the workforce reduction of approximately $759,000, and the Company has
recognized all expenses associated with the Strategic Restructuring as of the end of fiscal 2023. The costs pertain to severance and
other employee termination-related costs and various professional fees the Company required to assist with execution of the Strategic
Restructuring. The following is a reconciliation of the Strategic Restructuring liability reflected on the Company’s condensed
consolidated balance sheet under “Accrued expenses”.
 
SCHEDULE OF RECONCILIATION OF THE
RESTRUCTURING LIABILITY


  
(in thousands) 

  
Accrued  
   
   
Accrued  
As of January 31, 2024 

  
Balance as of January 31, 2023  
2023 Expenses to Date  
2023 Cash Payments  
Balance as of January 31, 2024  
Total Costs Incurred to Date  
Total Expected Costs 

Severance expense 
    
    
    
    
    
   

Cost of sales 
$   —  
$154  
$154  
$—  
$154  
$154 

Selling, general, and administrative 
 —  
 350  
 276  
 74  
 350  
 350 

Research and development 
 —  
 227  
 227  
 —  
 227  
 227 

Total severance expense 
$—  
$731  
$657  
$74  
$731  
$731 

Professional fees 
 —  
 28  
 28  
 —  
 28  
$28 

Total 
$—  
$759  
$685  
$74  
$759  
 759 

 
Accounting
Pronouncements Recently Adopted

 
In
November 2019, the FASB issued ASU 2016-13, Financial Instruments—Credit Losses (Topic 326): Measurement of Credit Losses on Financial
Instruments, which improves guidance around accounting for financial losses on accounts receivable. For smaller reporting entities, ASU
2016-13 is effective for annual periods beginning after December 15, 2022, including interim periods within those fiscal years. The Company’s
adoption of ASU 2016-13 was effective February 1, 2023. An analysis of contract receivables, including credit losses, was conducted during
the first quarter of fiscal 2024. The adoption of this ASU did not have a material impact on our consolidated financial statements
or disclosures. 
 

64
 

 
Recent
Accounting Pronouncements Not Yet Adopted
 
In
November 2023, the FASB issued ASU 2023-07, Segment Reporting (Topic 280): Improvements to Reportable Segment Disclosures, which improves
guidance around the disclosures about a public entity’s reportable segments and additional details about a reportable segment’s
expenses. ASU 2023-07 is effective for all public entities for annual periods beginning after December 15, 2023, and interim periods
within fiscal years beginning after December 15, 2024. The Company’s adoption of ASU 2023-07 will be effective in the annual report
for the fiscal year ending January 31, 2025. The adoption of this ASU is not expected to have a material impact on our consolidated financial
statements or disclosures.
 
In
December 2023, the FASB issued ASU 2023-09, Income Taxes (Topic 740): Improvements to Income Tax Disclosures, which enhance the transparency
and decision usefulness of income tax disclosures. For public entities, ASU 2023-09 is effective for annual periods beginning after December
15, 2024. The adoption of this ASU is not expected to have a material impact on our consolidated financial statements or disclosures.
 
NOTE
3 — BUSINESS COMBINATION 
 
Avelead
Acquisition
 
The
Company acquired all of the equity interests of Avelead as part of the Company’s strategic expansion into the revenue cycle management,
acute-care healthcare space (the “Transaction”). The Transaction was completed on August 16, 2021.
 
The
aggregate consideration for the purchase of Avelead was approximately $29.7 million (at fair value) consisting of (i) $12.5 million in
cash, net of cash acquired, (ii) $6.5 million in common stock, and (iii) approximately $10.7 million in contingent consideration (see
below). The Company issued 5,021,972 shares of its restricted common stock (the “Acquisition Restricted Common Stock”). The
Acquisition Restricted Common Stock had a fair value as of the closing date of the acquisition of $6.5 million. Additionally, the Transaction
included two types of contingent consideration; the first is referred to herein as “SaaS Contingent Consideration” and the
second is referred to herein as “Renewal Contingent Consideration.” The SaaS Contingent Consideration and Renewal Contingent
Consideration had an aggregate value of approximately $10.7 million as of the date of closing. The owners of Avelead are also referred
to herein as “Sellers” and are enumerated in the UPA (as defined below).
 
The
Unit Purchase Agreement (hereafter referred to as the “UPA”), stated that the purchase price for Avelead at closing included
a cash payment of $11.9
million. Additionally, the Company paid $285,000
of the Sellers’ closing costs, $285,000
related to the working capital adjustment as
defined in the UPA. Finally, at closing, the Company issued the Acquisition Restricted Common Stock with a fair value of approximately
$6.5
million, based on a 30-day average of the closing
price of the Company’s common stock prior to the closing date. The SaaS Contingent Consideration and the Renewal Contingent Consideration
described in more detail below were included in the UPA as potential future consideration for the Transaction. These are reflected on
the Company’s consolidated balance sheet as “Acquisition earnout liability.”
 
The
contingent consideration is comprised of “SaaS Contingent Consideration” and “Renewal Contingent Consideration”
which are described in more detail as follows:
 


 
●
The
    SaaS Contingent Consideration is calculated based upon Avelead’s recurring SaaS revenue recognized during the first and second
    year following the closing of the Transaction. The Company will pay the SaaS Contingent Consideration as follows: (i) 50% in cash
    and (ii) 50% in shares of Company common stock valued at the time the earnout is paid subject to a collar, as described below.

 


 
●
The
    first year SaaS Contingent Consideration was calculated as 75% of Avelead’s recognized SaaS revenue from September 1, 2021
    to August 31, 2022. The first-year payment was subject to a deduction of $665,000 spread equally between the cash and common stock
    portion of the earnout consideration. Assuming that Avelead was within 80% of its forecasted SaaS revenue in the first year earnout,
    the Company agreed to a floor and ceiling on the value of the Company’s restricted common stock issued as consideration for
    the earnout. That collar had a floor of $3.50 per share and a ceiling of $5.50 per share for the first year earnout. The first year
    SaaS Contingent Consideration was paid on November 21, 2022, as discussed in more detail below. 

 

65
 

 


 
●
The
    second year SaaS Contingent Consideration was calculated as 40% of Avelead’s recognized SaaS revenue from September 1, 2022
    to August 31, 2023. Assuming that Avelead was within 80% of its forecasted SaaS revenue in the second year earnout, the Company agreed
    to a floor and ceiling on the Company’s restricted common stock issued as consideration for the earnout. That collar had a
    floor of $4.50 per share and a ceiling of $6.50 per share for the second year earnout. The second year SaaS Contingent Consideration
    remained outstanding as of January 31, 2024, as the Company and the Sellers work towards a resolution regarding the payment of the
    second year SaaS Contingent Consideration. 

 


 
1
If
    Avelead does not achieve 80% of its forecasted revenue, the price per share will revert back to the Company’s market price
    based upon a 30-day average.

 



     
●
The
    Renewal Contingent Consideration was tied directly to a successful renewal of a specific client of Avelead. To meet the definition
    of a renewal, Avelead was required to achieve a minimum threshold of contracted revenue in an updated, annual, renewed contract with
    the specified client. The renewal occurred on or about June 1, 2022 and June 1, 2023. The Renewal Contingent Consideration was payable
    in shares of Company restricted common stock valued as of the date of closing. The Renewal Contingent Consideration is either earned
    or not earned based upon the renewal of the specified client at the minimum amount of contracted revenue. There is no pro-ration
    of the underlying Renewal Contingent Consideration. On November 21, 2022, the Company issued 627,746 shares of restricted common
    stock to the Sellers in connection with the first year Renewal Contingent Consideration. The second year Renewal Contingent Consideration
    remained outstanding as of January 31, 2024, as the Company and the Sellers work towards a resolution regarding the payment of the
    second year Renewal Contingent Consideration.

 
On
November 21, 2022, the Company made the first year earnout payments and issued shares of restricted common stock to the Sellers in accordance
with the UPA. In connection with the first year earnout payment, the Company made an aggregate cash payment of $2,012,000 and issued
1,243,292 unregistered securities in the form of restricted common stock, par value $0.01 per share (“restricted common stock”),
for the SaaS Contingent Consideration and issued 627,746 shares of restricted common stock for the Renewal Contingent Consideration.
The estimated aggregate value of the first year earnout payment was $4,000,000 with respect to the SaaS Contingent Consideration and
$1,000,000 with respect to the Renewal Contingent Consideration.
 
As
of January 31, 2024, the Company has not made the second year earnout payments to the Sellers or issued shares of common stock in connection
therewith. In connection with the second year earnout payment, the Company has estimated cash payments of $1,214,000
and will issue 961,640
shares of restricted common stock for the SaaS
Contingent Consideration and 627,746
shares of restricted common stock for the Renewal
Contingent Consideration. The estimated aggregate value of the second year earnout payment is $1,550,000
for the SaaS Contingent Consideration and $244,000
for the Renewal Contingent Consideration. The
Company and the Sellers reached an agreement to defer the cash portion of the SaaS Contingent Consideration and Renewal Contingent Consideration
payments over time through October 31, 2024. On March 27, 2024, the Company issued 961,640
shares of restricted common stock to the Sellers
for the SaaS Contingent Consideration and 627,746
shares of restricted common stock for the Renewal
Contingent Consideration. These liabilities are reflected at the fair value of the future commitment on the Company’s consolidated
balance sheet, as Acquisition Earnout Liability.
 
The
Company entered into an employment agreement and a separation agreement with each of the two Sellers. Acquisition-related costs
include the cost of a two-year separation agreement with one of the Sellers. The separation agreement was expensed at the closing of
the transaction as there were no material future obligations of the Seller to the Company within acquisition-related costs. The
employment agreement with the other Seller had a two-year term and entitled the Seller to six-months separation pay in the event of
termination without cause. The expense for the employment agreement is recognized ratably over the service period customary with
other employment agreements within selling, general, and administrative expense. On September 1, 2023, the Company terminated
the employment agreement. In exchange for a general release from the Seller, the Company agreed to accelerate the vesting of 150,000 outstanding
and unvested shares of restricted common stock of the Company previously granted to the Seller, subject to such Seller’s
non-revocation of a general release of claims against the Company.
 

66
 

 
NOTE
4 — OPERATING LEASES
 
We
determine whether an arrangement is a lease at inception. Right-of-use assets represent our right to use an underlying asset for the
lease term and lease liabilities represent our obligation to make lease payments arising from the lease. Operating lease right-of-use
assets and liabilities are recognized at commencement date based on the present value of lease payments over the expected lease term.
Since our lease arrangements do not provide an implicit rate, we use our incremental borrowing rate for the expected remaining lease
term at commencement date for new and existing leases in determining the present value of future lease payments. Operating lease expense
is recognized on a straight-line basis over the lease term. The Company has moved to a virtual office model and does not have a physical
office space. Membership agreements and daily space rentals are leveraged by the Company when groups need to meet in person with the
costs expensed as incurred. As of January 31, 2024, the Company recorded $30,000 related to such space
rentals.
 
Alpharetta
Office Lease
 
The Company entered into a lease
for office space in Alpharetta, Georgia, on March 1, 2020. The lease expired on March 31, 2023. At inception, the Company recorded a right-of
use asset of $540,000, and related current and long-term operating lease obligation in the accompanying consolidated balance sheet. As
of January 31, 2023, operating lease right-of use assets totaled $32,000, and the associated lease liability of $35,000 is included in
current liabilities. The Company used a discount rate of 6.5% to determine the lease liability. As of January 31, 2024 and 2023, the Company
had lease operating costs of approximately $32,000 and $194,000, respectively. The Company paid cash of approximately $36,000 and $210,000
for the lease in fiscal 2023 and fiscal 2022, respectively.
 
On
October 1, 2021, the Company entered into an agreement with a third-party to sublease its office space in Alpharetta, Georgia, (the
“Sublease Agreement”). The sublease term is for 18
months which coincides with the Company’s underlying lease (see below). The Company received $292,000
from the sublessee over the term of the sublease. The sublease did not relieve the Company of its original obligation under the
lease, and therefore the Company did not adjust the operating lease right-of-use asset and related liability. The Company incurred
an amount of fees and expenses to enter into the Sublease Agreement that were recorded as “acquisition-related costs”
for fiscal 2021. As of January 31, 2024, the Company recorded $33,000
as other income related to the sublease.

 
Suwanee
Office Lease
 
Upon
acquiring Avelead on August 16, 2021 (refer to Note 3 – Business Combination), the Company assumed an operating
lease agreement for the corporate office space of Avelead. The 36-month term lease commenced March 1, 2019, and initially expired on
February 28, 2022. As of January 31, 2024, the Company recorded $6,000 in rent expense. The lessor is an entity controlled by one of
the Sellers that was employed by the Company until August 2023. In February 2022, the Company renewed the lease for twelve months. The
Company made monthly lease payments of $5,999 for a total of $71,984 over the term of the lease. The lease expired on February 28, 2023,
and was not renewed.
 

67
 

 
NOTE
5 — DEBT
 
Outstanding
principal balances on debt consisted of the following at:
 SCHEDULE OF OUTSTANDING PRINCIPAL BALANCES 


  
January 31, 2024  
January 31, 2023 

Term loan 
$9,000,000  
$9,750,000 

Financing cost payable 
 135,000  
 69,000 

Less: Deferred financing cost 
 (69,000) 
 (105,000)

Total 
 9,066,000  
 9,714,000 

Less: Current portion 
 (1,500,000) 
 (750,000)

Non-current portion of debt 
$7,566,000  
$8,964,000 

 
Term
Loan Agreement
 
On
August 26, 2021, the Company and its subsidiaries entered into the Loan Agreement with WAB. Pursuant
to the Loan Agreement, WAB agreed to provide the Company and its subsidiaries with a term loan facility in the maximum principal amount
of $10,000,000. Amounts outstanding under the term loan portion of the Loan Agreement bear interest at a per annum rate equal to the
Prime Rate (as published in The Wall Street Journal) plus 1.5%, with a Prime “floor” rate of 3.25%.
 
The
Loan Agreement has a five-year term, and the maximum principal amount was advanced in a single-cash advance on or about the closing date.
Interest accrued under the Loan Agreement is due monthly, and the Company is required to make monthly interest-only payments through
the one-year anniversary of the closing date. From the first anniversary of the closing date through the maturity date, the Company is
required to make monthly payments of principal and interest that increase over the term of the agreement. The Loan Agreement requires
principal repayments on the anniversary date of the closing of the debt agreement of $500,000 in the second year, $1,000,000 in the third
year, $2,000,000 in the fourth year, and $3,000,000 in the fifth year, respectively, with the remaining outstanding principal balance
and all accrued but unpaid interest due in full on the maturity date. The Loan Agreement may also require early repayments if certain
conditions are met.
 
The
Company recorded $130,000 in deferred financing costs related to the Loan Agreement. These deferred financing costs are being amortized
over the term of the loan. The Company will also incur $200,000 in financing costs at the earlier of the term date of the loan, or pre-payment.
These costs are being accreted, through interest expense, to the full value of the $200,000 over the term of the loan.
 
Debt
Modification and Revolving Line of Credit
 
On
November 29, 2022, the Company executed the Second Modification (the “Second Modification”) to the Second Amended and Restated
Loan and Security Agreement (as amended and modified, the “Loan Agreement”). The Second Modification expanded the Company’s
total borrowing to include a $2,000,000 revolving line of credit. The revolving line of credit is co-terminus with the term loan and
matures on August 26, 2026. There are no requirements to draw on the line of credit. Amounts outstanding under the line of credit portion
of the Loan Agreement bear interest at a per annum rate equal to the Prime Rate (as published in The Wall Street Journal) plus 1.5%,
with a Prime “floor” rate of 3.25%. The Second Modification also amended the covenants of the Company under the Loan Agreement.
At January 31, 2024, there was a $1,500,000 balance outstanding on the revolving line of credit.
 
The
Second Modification includes customary financial covenants as follows:
 


 
a.
Minimum
    Cash. Borrowers shall, at all times, maintain unrestricted cash in an amount not less than Two Million Dollars ($2,000,000).

 
 
 

 
b.
Maximum
    Debt to ARR Ratio. Borrowers’ Maximum Debt to ARR Ratio, measured on a quarterly basis as of the last day of each fiscal
    quarter, shall not be greater than the amount set forth under the heading “Maximum Debt to ARR Ratio” as of, and for
    each of the dates appearing adjacent to such “Maximum Debt to ARR Ratio”.

 SCHEDULE OF MAXIMUM DEBT TO ARR RATIO


Quarter Ending 
Maximum Debt to ARR Ratio

October 31, 2022 
0.80 to 1.00

January 31, 2023 
0.70 to 1.00

April 30, 2023 
0.65 to 1.00

July 31, 2023 
0.60 to 1.00

October 31, 2023 
0.55 to 1.00

January 31, 2024 
0.50 to 1.00

 


 
c.
Maximum
    Debt to Adjusted EBITDA Ratio. Commencing with the quarter ending April 30, 2024, Borrowers’ Maximum Debt to Adjusted EBITDA
    Ratio, measured on a quarterly basis as of the last day of each fiscal quarter for the trailing four (4) quarter period then ended,
    shall not be greater than the amount set forth under the heading “Maximum Debt to Adjusted EBITDA Ratio” as of, and for
    each of the dates appearing adjacent to such “Maximum Debt to Adjusted EBITDA Ratio”.

 

68
 

 SCHEDULE OF MAXIMUM DEBT TO ADJUSTED EBITDA RATIO


Quarter Ending 
Maximum Debt to  Adjusted EBITDA  Ratio

April 30, 2024 
3.50 to 1.00

July 31, 2024 and on the last day of each quarter, thereafter 
2.00 to 1.00

 


 
d.
Fixed
    Charge Coverage Ratio. Commencing with the quarter ending April 30, 2024, Borrowers shall maintain a Fixed Charge Coverage Ratio
    of not less than 1.20 to 1.00, measured on a quarterly basis as of the last day of each fiscal quarter for the trailing four (4)
    quarter period then ended.

 
The
Loan Agreement also includes customary negative covenants, subject to exceptions, which limit transfers, capital expenditures, indebtedness,
certain liens, investments, acquisitions, dispositions of assets, restricted payments, and the business activities of the Company, as
well as customary representations and warranties, affirmative covenants and events of default, including cross defaults and a change
of control default. The line of credit also is subject to customary prepayment requirements. For the period ended January 31, 2024, the
Company was not in compliance with the Maximum Debt to ARR Ratio covenant pursuant to the Second Modification; however, on February 7,
2024, the Company was provided a waiver exception for being non-compliant. (Refer to Note 14 – Subsequent to our consolidated financial
statements included in Part II, Item 8, “Financial Statements and Supplementary Data” for additional information.). Substantially
all the assets of the Company are collateralized by the Loan Agreement.
 
The
Company recorded $20,000 in deferred financing costs related to the Second Modification. These deferred financing costs are being amortized
over the remaining term of the loan. The Company also incurred $50,000 in financing costs at the earlier of the term date of the loan,
or pre-payment. These costs are being accreted, through interest expense, to the full value of the $250,000 over the remaining term of
the loan. The full value of $250,000 includes the $200,000 costs incurred in connection with the Loan Agreement (see below).
 
On
February 7, 2024, the Company executed the Third Modification and Waiver (the “Third Modification”) to the Loan Agreement.
Refer to Note 14 – Subsequent Events to our consolidated financial statements included in Part II, Item 8, “Financial Statements
and Supplementary Data” for additional information regarding the Third Modification.
 

69
 

 
NOTE
6 — GOODWILL AND INTANGIBLE ASSETS
 
Goodwill
 
The
changes in the carrying amount of goodwill were as follows:
 SCHEDULE OF CARRYING AMOUNT OF GOODWILL


  
Balance 

Balance as of January 31, 2023 
$23,089,000 

Impairment 
 (9,813,000)

Balance as of January 31, 2024 
$13,276,000 

 
In
October 2023, the Company was notified by a legacy client of its intent to not renew its contract as of its expiration on December 31,
2023. At that time, the Company elected to accelerate the execution of a planned strategic restructuring that was designed to reduce
costs while maintaining the Company’s ability to expand its SaaS business. Both the client termination and the execution of the
strategic restructuring were announced on October 16, 2023. Following these announcements, the Company’s share price declined significantly.
Based on these events (collectively, the “Triggering Events”), the Company identified indicators of possible impairment and
initiated testing using a valuation date of October 31, 2023. The impairment tests were conducted under guidance of ASC Topic 360, Impairment
and Disposal of Long-Lived Assets (“ASC 360”) for certain long-lived assets, including capitalized contract costs, developed
technology, client relationships and trade names, and in accordance with ASC Topic 350, Intangibles – Goodwill and Other (“ASC
350”) with respect to the reporting unit’s goodwill.
 
The
Company determined that, effective January 31, 2023, it had one reporting unit for purposes of evaluation of goodwill. Based on the Triggering
Events and in conjunction with the preparation of the Company’s financial statements for the three and nine months ended October
31, 2023, the Company tested the reporting unit’s goodwill for possible impairment as of October 31, 2023. The testing for impairment
was performed under the guidance of ASC 350. The testing utilized a discounted debt-free net cash flow (“DCF”) method under
the income approach and the market capitalization method (“MCM”) under the market approach. The sum of the weighted values
of each method was used to derive the fair value of the Company’s equity.
 
The
MCM calculates the aggregate market value of the Company based on the total number of shares outstanding and the current market price
of the shares as of the valuation date. Data on similar mergers and acquisitions within the healthcare technology sector are observed
to determine control premium that represents a stock premium percentage offered by an acquirer to a public company. The control premium
applied to the aggregate market value represents MCM calculated fair value.
 
The
DCF incorporates the use of projected financial information and a discount rate using a weighted average cost of capital with cost of
equity estimated based on the capital asset pricing model. The cash-flow projections are based on financial forecasts developed by management
that include forecasts of future operating results based on internal budgets and strategic plans to invest in working capital to support
anticipated revenue growth. External factors and business conditions are considered by management when setting the long-term growth rates.
The selected discount rate considers the risk and nature of the reporting unit’s cash flows and the rates of return market participants
would require to invest their capital in the Company.
 
The
Company concluded that its goodwill was impaired based on the weighted combination of the DCF and MCM value estimates which resulted
in a calculated fair value lower than the equity carrying value. The Company recorded an impairment of goodwill in the amount of $9,813,000
reported as “Goodwill Impairment” on its condensed consolidated statement of operations.
 
Intangible
assets consist of the following:
 SCHEDULE OF FINITE-LIVED INTANGIBLE ASSETS


  
  
January 31, 2024 

  
Estimated
Useful Life 
Gross
Assets  
Accumulated
Amortization  
Net Assets 

Finite-lived assets: 
  
    
    
   

Client relationships 
10
years 
$8,370,000  
$2,058,000  
$6,312,000 

Internally developed software 
9 years 
 6,380,000  
 1,742,000  
$4,638,000 

Trademarks and tradenames 
15 years 
 1,340,000  
 219,000  
$1,121,000 

Total 
  
$16,090,000  
$4,019,000  
$12,071,000 

 

70
 

 


  
January 31, 2023

  
Estimated 
Gross  
Accumulated  
  

  
Useful Life 
 Assets  
Amortization  
Net Assets 

Finite-lived assets: 
  
    
    
   

Client relationships 
8-10 years 
$9,700,000  
$1,463,000  
$8,237,000 

Internally Developed Software 
9 years 
 6,380,000  
 1,034,000  
 5,346,000 

Trademarks and Tradenames 
15 years 
 1,340,000  
 130,000  
 1,210,000 

Total 
  
$17,420,000  
$2,627,000  
$14,793,000 

 
ASC
360 defines a multi-step process to test long-lived assets, including intangible assets, for recoverability that if failed would indicate
impairment. First, the Company must consider whether indicators of impairment of long-lived assets are present, which the Company determined
the Triggering Events provided such indication.
 
Next,
the Company must review the long-lived assets to define asset group(s) that would reflect the lowest level of assets to which discrete
cash flows are identifiable. In performing this review, the Company identified that the long-lived asset “client relationships”
related to Avelead should be classified as abandoned (the “Abandoned Asset”) with the Company determining that it no longer
has plans to provide the corresponding consulting service. The Abandoned Asset’s carrying value would need to be set to its salvage
value which would be zero given no future cash flows.
 
The
Company determined the lowest level of discrete cash flows is at the reporting unit level, and all remaining long-lived assets (excluding
the Abandoned Asset) and goodwill would represent its only asset group. Recoverability is assessed by comparing that the sum of the discrete
undiscounted cash flows exceeds the carrying value of the asset group. The undiscounted cash flow projections are based on 8-year (representing
the useful life of the primary asset in the asset group) financial forecasts developed by management that include forecasts of future
operating results based on internal budgets and strategic plans to investment in working capital to support anticipated revenue growth.
 
The
undiscounted cash flows for the long-lived assets were above the carrying amounts indicating that the long-lived asset group is recoverable
and no further impairment to long-lived assets exists as of October 31, 2023. In fiscal 2023, the Company recorded $963,000 as “Impairment
of long-lived assets” on its condensed consolidated statement of operations to adjust the Abandoned Asset to its salvage value
of zero.
 
The
Company recognized amortization expense on intangible assets of $1,760,000 and $1,971,000 for fiscal 2023 and 2022, respectively.
 
Amortization
over the next five fiscal years for intangible assets is estimated as follows:

 SCHEDULE OF FUTURE AMORTIZATION EXPENSE FOR INTANGIBLE ASSETS


  
Annual
Amortization Expense 

2024 
$1,635,000 

2025 
 1,635,000 

2026 
 1,635,000 

2027 
 1,635,000 

2028 
 1,635,000 

Thereafter 
 3,896,000 

Total 
$12,071,000 


 

The
Company wrote-off the Abandoned Asset during fiscal 2023 with a gross asset value of $1,330,000.
There was no impact to the consolidated statements of operations as this eliminated the asset and accumulated amortization of the
fully amortized intangible assets.
 

71
 

 
NOTE
7 — INCOME TAXES
 
For
fiscal 2023 and 2022, income taxes  consist of the following:
 SCHEDULE OF INCOME TAXES FOR CONTINUING OPERATION


  
2023  
2022 

  
Fiscal Year 

  
2023  
2022 

Current tax expense: 
    
   

Federal 
$—  
$— 

State 
 (58,000) 
 (62,000)

Total current tax benefit (expense) 
$(58,000) 
$(62,000)

Deferred tax expense: 
    
   

Federal 
$86,000  
$(6,000)

State 
 18,000  
 (3,000)

Total deferred tax benefit (expense) 
$104,000  
$(9,000)

Income tax benefit (expense) 
$46,000  
$(71,000)

 
The
income tax expense differs from the amount computed using the federal statutory income tax rate of 21% for fiscal 2023 and 2022 as follows:
 SCHEDULE OF EFFECTIVE INCOME TAX RATE RECONCILIATION


  
2023  
2022 

  
Fiscal Year 

  
2023  
2022 

Federal tax benefit at statutory rate 
$3,887,000  
$2,348,000 

State and local tax expense, net of federal 
 (28,000) 
 (52,000)

Increase in valuation allowance 
 (3,994,000) 
 (2,128,000)

Permanent items: 
    
   

Other 
 (36,000) 
 (20,000)

Reserve for uncertain tax position 
 (7,000) 
 (18,000)

Federal research and development (R&D) tax credit 
 33,000  
 91,000 

Stock-based compensation 
 135,000  
 (289,000)

Other 
 56,000  
 (3,000)

Income tax benefit (expense) 
$46,000  
$(71,000)

 
The
Company provides deferred income taxes for temporary differences between assets and liabilities recognized for financial reporting and
income tax purposes. The income tax effects of these temporary differences and credits are as follows:
 SCHEDULE OF DEFERRED TAX ASSETS AND LIABILITIES


  
2024  
2023 

  
January 31, 

  
2024  
2023 

Deferred tax assets: 
    
   

Allowance for credit losses 
$26,000  
$39,000 

Deferred revenue 
 209,000  
 122,000 

Accruals 
 67,000  
 232,000 

Net operating loss carryforwards 
 15,748,000  
 11,242,000 

Stock-based compensation  
 427,000  
 342,000 

Finite-lived intangible assets 
 1,739,000  
 1,344,000 

R&D tax credit 
 1,434,000  
 1,407,000 

Other 
 1,000  
 2,000 

Total deferred tax assets 
 19,651,000  
 14,730,000 

Valuation allowance 
 (19,646,000) 
 (14,347,000)

Net deferred tax assets 
 5,000  
 383,000 

Deferred tax liabilities: 
    
   

Property and equipment 
 (5,000) 
 (5,000)

Finite-lived intangible liabilities 
 —  
 (482,000)

Total deferred tax liabilities 
 (5,000) 
 (487,000)

Net deferred tax liabilities 
$—  
$(104,000)

 

72
 

 

At
January 31, 2024, the Company had U.S. federal net operating loss carry forwards of $65,107,000 and
$29,083,000
of these net operating losses expire at various dates through fiscal 2038. The remaining $36,024,000
of these net operating losses can be carried forward indefinitely under the provisions of the Tax Cuts and Jobs Act (TCJA). The TCJA
also eliminated the ability to carry back net operating losses. The Company also had state net operating loss carry forwards of
$37,650,000
and Federal R&D credit carry forwards of $1,699,000
and Georgia R&D credit carry forwards of $94,000,
all of which expire at various dates through fiscal 2042.
 
In
assessing the realizability of deferred tax assets, management considers whether it is more likely than not that all or some portion
of the deferred tax assets will not be realized. The ultimate realization of deferred tax assets is dependent upon the generation of
future taxable income during the periods in which those temporary differences become deductible. Management considers the scheduled reversal
of deferred tax liabilities, projected future taxable income and tax planning strategies in making this assessment. The Company established
a valuation allowance of $19,646,000 and $14,347,000 at January 31, 2024 and 2023, respectively. The increase in the valuation allowance
of $3,994,000 was driven primarily by the Company’s federal net operating losses.
 
The
Company and its subsidiaries are subject to U.S. federal income tax as well as income taxes in multiple state and local jurisdictions.
The Company has concluded all U.S. federal tax matters for years through January 31, 2020. All material state and local income tax matters
have been concluded for years through January 31, 2019. The Company is no longer subject to IRS examination for periods prior to the
tax year ended January 31, 2020; however, carry forward losses that were generated prior to the tax year ended January 31, 2020 may still
be adjusted by the IRS if they are used in a future period.
 
The
Company has recorded a reserve, including interest and penalties, for uncertain tax positions of $340,000 and $333,000 as of January
31, 2024 and 2023, respectively. As of January 31, 2024 and 2023, the Company had no accrued interest and penalties associated with unrecognized
tax benefits.
 
A
reconciliation of the beginning and ending amounts of gross unrecognized tax benefits (excluding interest and penalties) is as follows:

 SCHEDULE OF GROSS UNRECOGNIZED TAX BENEFITS


  
2023  
2022 

Beginning of fiscal year 
$333,000  
$315,000 

Additions for tax positions for the current year 
 9,000  
 11,000 

Additions for tax positions of prior years 
 —  
 7,000 

Subtractions for tax positions of prior years 
 (2,000) 
 — 

End of fiscal year 
$340,000  
$333,000 

 
NOTE
8 — EQUITY
 
Capital
Raise
 
On
October 24, 2022, the Company entered into purchase agreements with certain investors pursuant to which the Company agreed to issue and
sell in a registered direct offering (the “2022 Offering”) an aggregate of 6,299,989 shares of common stock, par value $0.01
per share, at a purchase price of $1.32 per share. The gross proceeds to the Company from the 2022 Offering were approximately $8,316,000.
The Company used the proceeds of the 2022 Offering for general corporate purposes. The 2022 Offering closed on October 26, 2022.
 
Registration
of Shares Issued to 180 Consulting
 
On
June 22, 2022, the Company filed a Registration Statement on Form S-3 (Registration No. 333-265773) for purposes of registering for resale
272,653 shares of common stock issued to 180 Consulting, LLC (“180 Consulting”). The Registration Statement was declared
effective by the SEC on July 1, 2022. 
 
On
June 28, 2023, the Company filed a Registration Statement on Form S-3 (Registration No. 333-272993) for purposes of registering for resale
394,127 shares of common stock issued to 180 Consulting, LLC (“180 Consulting”). The Registration Statement was declared
effective by the SEC on July 10, 2023. 
 

73
 

 
Authorized
Shares Increase
 
At
the 2022 Annual Meeting, the Company’s stockholders approved an amendment to the Streamline Health Solutions, Inc. Third Amended
and Restated 2013 Stock Incentive Plan to increase the number of shares of the Company’s common stock authorized for issuance thereunder
by 2,000,000 shares, from 8,223,246 shares to 10,223,246 shares. The Company’s stockholders also approved an amendment to the Company’s
Certificate of Incorporation, as amended, to increase the total number of authorized shares of the Company’s common stock from
65,000,000 shares to 85,000,000 shares.
 
At
the 2023 Annual Meeting, the Company’s stockholders approved an amendment to the 2013 Plan to increase the number of shares of
the Company’s common stock authorized for issuance thereunder by 1,000,000 shares, from 10,223,246 shares to 11,223,246 shares.
 
NOTE
9 — MAJOR CLIENTS
 
During
fiscal 2023, one individual client accounted
for 10% or more of our revenue. This client accounted
for 23%
of total revenue for fiscal 2023. In the third quarter of fiscal 2023, the Company received a notice from this client of its intent not
to renew its contract following the expiration of the current term on December 31, 2023. During fiscal 2022, two
individual clients accounted for 10% or more of our revenue. These
clients accounted for 20%
and 12%,
respectively, of total revenue for fiscal 2022. Four clients represented 14%, 12%, 12%,
and 11%,
respectively, of accounts receivable as of January 31, 2024, and four clients represented 13%,
12%,
12%
and 10%,
respectively, of accounts receivable as of January 31, 2023. Many of our clients are invoiced on an annual basis.
 
NOTE
10 — EMPLOYEE RETIREMENT PLAN
 
The
Company has established a 401(k) retirement plan that covers all associates. Company contributions to the plan may be made at the discretion
of the board of directors. The Company’s matched amount is 50% up to the first 4% of compensation deferred by each associate. The
total compensation expense for this matching contribution was $242,000 and $258,000 in fiscal 2023 and 2022, respectively.
 
NOTE
11 — STOCK-BASED COMPENSATION
 
Stock
Option Plans
 
The
2013 Plan replaced the Company’s 2005 Incentive Compensation Plan (the “2005 Plan”). The 2005 Plan expired based upon
its terms. Accordingly, all the outstanding awards and any unallocated pool of un-issued options under the 2005 Plan were re-characterized
to the 2013 Plan. Under these plans, the Company is authorized to issue equity awards (stock options, stock appreciation rights or “SARs”,
and restricted stock) to directors and associates of the Company. Under the 2013 Plan, as amended, the Company is authorized to issue
a number of shares not to exceed 11,223,246. The options granted under the 2013 Plan have terms of ten years or less, and typically vest
and become fully exercisable ratably over three years of continuous service to the Company from the date of grant. At January 31, 2024
and 2023, options to purchase 67,500 and 628,958 shares of the Company’s common stock, respectively, had been granted and were
outstanding under these plans. At January 31, 2024, there were no SARs outstanding.
 

74
 

 

A
summary of stock option activity in fiscal 2023 follows:
 SCHEDULE OF STOCK OPTION ACTIVITY 



  
   
Weighted  
   
  

  
   
Average  
Remaining  
Aggregate 

  
Options  
Exercise  Price  
Life in  Years  
intrinsic  value 

Outstanding as of January 31, 2023 
 628,958  
$1.95  
 7.31  
$360,000 

Granted 
 —  
 —  
    
   

Exercised 
 —  
 —  
    
   

Expired 
 (39,250) 
 7.14  
    
   

Forfeited 
 (522,208) 
 1.55  
    
   

Outstanding as of January 31, 2024 
 67,500  
$1.73  
 2.37  
$— 

Exercisable as of January 31, 2024 
 67,500  
$1.73  
 2.37  
$— 

Vested as of January 31, 2024 
 67,500  
$1.73  
 2.37  
$— 

 
No
options were granted in fiscal 2023 or fiscal 2022.
 
At
January 31, 2024, there was no  unrecognized compensation cost related to non-vested stock-option awards.  The expense associated with stock option awards was $71,000 and $132,000,
respectively, for fiscal 2023 and 2022. No options were exercised during fiscal 2023 or 2022.
 
The
2013 Plan contains change in control provisions whereby any outstanding equity awards under the plans subject to vesting, which have
not fully vested as of the date of the change in control, shall automatically vest and become immediately exercisable. One of the change
in control provisions is deemed to occur if there is a change in beneficial ownership, or authority to vote, directly or indirectly,
of securities representing 20% or more of the total of all of the Company’s then-outstanding voting securities, unless through
a transaction arranged by or consummated with the prior approval of the Board of Directors. Other change in control provisions relate
to mergers and acquisitions or a determination of change in control by the Board of Directors.
 

75
 

 
Restricted
Stock
 
The
Company is authorized to grant restricted stock awards to associates and directors under the 2013 Plan. The Company has also issued restricted
stock as inducement grants to certain new employees. The restrictions on the shares granted generally lapse over a one- to four-year
term of continuous employment from the date of grant. On November 1, 2022, our then-serving CEO, Wyche T. Green, III, was awarded 50,000
shares of restricted common stock that will vest in three substantially equal annual installments commencing on the first anniversary
of the date of grant. On May 20, 2022, Mr. Green was awarded 150,000 shares of restricted common stock that will vest in three substantially
equal annual installments commencing on the first anniversary of the date of grant. On April 1, 2023, Mr. Green was awarded 200,000 shares
of restricted common stock that will vest in three substantially equal annual installments commencing on the first anniversary of the
date of grant. Prior to his appointment as CEO of the Company, Mr. Stilwill was awarded 170,000 shares of restricted common stock on
April 1, 2023, that will vest in three substantially equal annual installments commencing on the first anniversary of the date of grant.
The grant date fair value per share of restricted stock, which is based on the closing price of our common stock on the grant date, is
expensed on a straight-line basis as the restriction period lapses. The shares represented by restricted stock awards are
considered outstanding at the grant date, as the recipients are entitled to voting rights. A summary of restricted stock award activity
for fiscal 2023 and 2022 is presented below:

 SCHEDULE OF RESTRICTED STOCK AWARD ACTIVITY


  
   
Weighted 

  
Non-vested  
Average 

  
Number of  
Grant Date 

  
Shares  
Fair Value 

Non-vested balance at January 31, 2022 
 1,043,350  
$1.57 

Granted 
 1,505,731  
 1.47 

Vested 
 (501,750) 
 1.63 

Forfeited 
 (199,300) 
 1.49 

Non-vested balance at January 31, 2023 
 1,848,031  
$1.48 

Granted 
 1,488,621  
 1.57 

Vested 
 (982,631) 
 1.48 

Forfeited 
 (383,500) 
 1.67 

Non-vested balance at January 31, 2024 
 1,970,521  
$1.51 


 
At
January 31, 2024, there was $1,938,000 of unrecognized compensation cost related to restricted stock awards. That cost is expected to be recognized
over a remaining period of 1.80 years.
 
The
expense associated with restricted stock awards for associates and directors was $1,590,000 and $983,000,
for fiscal 2023 and 2022, respectively.
 
NOTE
12— COMMITMENTS AND CONTINGENCIES
 
Consulting
Agreement with 180 Consulting
 
On
March 19, 2020, the Company entered into a Master Services Agreement (the “MSA”) with 180 Consulting, pursuant to which 180
Consulting has provided and will continue to provide a variety of consulting services in support of eValuator products including product
management, operational consulting, staff augmentation, internal systems platform integration and software engineering services, among
others, through separate executed statements of work (“SOWs”). On September 20, 2021, the Company entered into a separate
MSA in support of Avelead products. As of December 2023, all outstanding SOWs under both MSAs were effectively replaced by two new SOWs.
As of the end of fiscal 2023, there were two active SOWs under the eValuator MSA, and no active SOWS under the Avelead MSA. One of the
active SOWs include the ability to earn stock at a conversion rate to be calculated 20 days after the execution of the related SOW. The
MSA includes a termination clause upon a 90-day written notice. While no related party has a direct or indirect material interest in
this MSA or the related SOWs, individuals providing services to us under the MSA, and the related SOWs may share workspace and administrative
costs with 121G Consulting LLC (“121G”). 180 Consulting earned 564,707
shares for the year ended January 31, 2024 and
has earned an aggregate of 1,479,911
shares through January 31, 2024. For services
rendered by 180 Consulting, the Company recorded total cash fees of $2,580,000
and non-employee stock compensation of $582,000
 for fiscal 2023 as compared to $1,281,000
and $640,000,
respectively, for fiscal 2022. In addition, as
of the date of this report, the Company has not issued to 180 Consulting an aggregate of 206,517
shares as compensation for services previously
rendered during the three-months ended January 31, 2024. Such 564,707
shares will be issued in reliance on an exemption
from registration available under Section 4(a)(2) of the Securities Act. 
 

76
 

 
Inclusive
of the MSA executed with 180 Consulting are SOWs that provide for the Company to sublicense a software through 180 Consulting that is
owned by 121G. This is a services agreement for access to software that assists the Company in implementing and integrating with our
clients’ technology. The license agreement is designed such that there is no material financial benefit that accrues to 121G. 180
Consulting licenses the software from 121G at cost. The Company paid approximately $563,000 and $301,000 for the SOWs that include the sublicense
agreement in each of the fiscal years ended January 31, 2024 and 2023, respectively, which are included in the aforementioned totals
above.
 
Litigation
 
We
are, from time to time, a party to various legal proceedings and claims, which arise in the ordinary course of business. We are not aware
of any legal matters that are reasonably possible to have a material adverse effect on the Company’s consolidated results of operations,
financial position or cash flows.
 
NOTE
13 - RELATED PARTY TRANSACTIONS
 
Refer
to Note 3 – Business Combination. The Company acquired Avelead on August 16, 2021. We assumed a lease for corporate
office space from one of the selling shareholders of Avelead who was employed by the Company through August 2023. This lease term ended
February 2022 but was renewed for a term of 12 months through February 2023. For the year ended January 31, 2024, the Company recorded
rent expense of $6,000. Refer to Note 4 – Operating Leases to our consolidated financial statements included in Part II, Item 8,
“Financial Statements and Supplementary Data” for more information.
 
NOTE
14 — SUBSEQUENT EVENTS
 
Debt
Private Placement
 
On
February 1, 2024, the Company entered into a securities purchase agreement (the “Securities Purchase Agreement”) with certain
accredited investors, including certain directors and officers of the Company (collectively, the “Investors”), pursuant to
which the Company agreed to sell to the Investors unsecured subordinated promissory notes (the “Notes”) in the aggregate
principal amount of $4.4 million and warrants (the “Warrants”) to purchase up to an aggregate of 4,052,631 shares of the
Company’s common stock (the “Common Stock”) in a private placement (the “Debt Private Placement”). The
closing of the Debt Private Placement occurred on February 7, 2024 (the “Closing Date”).
 
In
connection with the Debt Private Placement, the Investors and each of the Company’s directors and officers agreed, subject to certain
exceptions set forth in the lock-up agreements, not to offer, sell, contract to sell, pledge, grant any option to purchase, make any
short sale or otherwise dispose of any shares of Common Stock, or any options or warrants to purchase any shares of Common Stock, or
any securities convertible into, exchangeable for or that represent the right to receive shares of Common Stock, for a period commencing
on the date of the lock-up agreement and ending 90 days from the Closing Date.
 


77
 

 
Notes
 
The
Notes bear interest at a rate of 15% per annum and mature on August 7, 2026 (the “Maturity Date”). All accrued and unpaid
interest on the Notes will be capitalized and added to the outstanding principal balance of the Notes and will be payable in cash on
the Maturity Date. The Company may redeem the Notes, in whole or in part, prior to the Maturity Date without any premium or penalty.
In the event the Company prepays any portion of the then outstanding principal balance of the Notes on or before the twelve (12) month
anniversary of the Closing Date, in addition to such prepayment of the principal balance, the Company must pay to the Investors a prepayment
fee (in accordance with the each Investor’s pro-rata share of the Notes) in an amount equal to the amount of interest that would
have accrued but for the prepayment from the date of such prepayment through such twelve (12) month anniversary of the Closing Date.
 
The
rights of each Investor to receive payments under the Notes are subordinate to the rights of Western Alliance Bank (“WAB”),
pursuant to a subordination agreement which the Investors entered into with WAB concurrently with the Debt Private Placement.
 
Warrants
 
The
Warrants have an exercise price of $0.38 (except for Warrants issued to the Company’s directors and officers which have an exercise
price of $0.39), are immediately exercisable, and will expire on the fourth anniversary of the Closing Date. The Warrants are subject
to customary adjustments for certain transactions affecting the Company’s capitalization. The terms of the Warrants preclude a
holder thereof from exercising such holder’s Warrants, and the Company from giving effect to such exercise, if after giving effect
to the issuance of Common Stock upon such exercise, the holder (together with the holder’s affiliates and any other persons acting
as a group together with the holder or any of the holder’s affiliates) would beneficially own in excess of 9.99% of the number
of shares of Common Stock outstanding immediately after giving effect to the issuance of Common Stock upon such exercise.
 
The
Notes and the Warrants described above were offered in a private placement under Section 4(a)(2) of the Securities Act of 1933, as amended
(the “Securities Act”), and/or Regulation D promulgated thereunder and, along with the Common Stock underlying the Warrants,
have not been registered under the Securities Act or applicable state securities laws. Accordingly, the Notes, the Warrants and the Common
Stock underlying the Warrants may not be offered or sold in the United States absent registration with the SEC or an applicable exemption
from such registration requirements and in accordance with applicable state securities laws. The securities were offered and sold to
“accredited investors” as that term is defined in Rule 501(a) under the Securities Act.
 
Common
Stock Private Placement
 
On
February 6, 2024, the Company completed the sale of 263,158 shares of the Company’s common stock to an accredited investor at a
purchase price of $0.38 per share for an aggregate purchase price of $100,000 (the “Common Stock Private Placement”).
 
The
common stock described above was offered in a private placement under Section 4(a)(2) of the Securities Act and/or Regulation D promulgated
thereunder and has not been registered under the Securities Act or applicable state securities laws. Accordingly, such common stock may
not be offered or sold in the United States absent registration with the SEC or an applicable exemption from such registration requirements
and in accordance with applicable state securities laws. The Common Stock was offered and sold to an “accredited investor”
as that term is defined in Rule 501(a) under the Securities Act.
 
Loan
Modification
 
On
February 7, 2024, the Company and certain of its subsidiaries entered into a Third Modification and Waiver (the “Third Modification”)
to the Loan Agreement with Western Alliance Bank.
 

78
 


 
The
Third Modification waived the Company’s non-compliance with the Maximum Debt to ARR Ratio under the Loan Agreement and amended
certain financial covenants as follows:
 


 
a.
Maximum
    ARR Net Leverage Ratio. Borrowers’ ARR Net Leverage Ratio, measured on a quarterly basis as of the last day of each fiscal
    quarter, shall not be greater than the amount set forth under the heading “Maximum ARR Net Leverage Ratio” as of, and
    for each of the dates appearing adjacent to such “Maximum ARR Net Leverage Ratio.

 SCHEDULE
OF MAXIMUM ARR NET LEVERAGE RATIO



Quarter Ending
 Maximum ARR Net Leverage Ratio 

April 30, 2024
 0.50 to 1.00 

July 31, 2024
 0.45 to 1.00 

October 31, 2024
 0.40 to 1.00 

January 31, 2025
 0.35 to 1.00 

 


 
c.
Maximum
    Debt to Adjusted EBITDA Ratio. Commencing with the quarter ending April 30, 2025, Borrowers’ Maximum Debt to Adjusted EBITDA
    Ratio, measured on a quarterly basis as of the last day of each fiscal quarter for the trailing four (4) quarter period then ended,
    shall not be greater than the amount set forth under the heading “Maximum Debt to Adjusted EBITDA Ratio” as of, and for
    each of the dates appearing adjacent to such “Maximum Debt to Adjusted EBITDA Ratio”.

 SCHEDULE OF MAXIMUM DEBT TO ADJUSTMENTS EBITDA RATIO


Quarter Ending
 Maximum Debt to Adjusted EBITDA Ratio 

April 30, 2025
 3.50 to 1.00 

July 31, 2025
 3.00 to 1.00 

October 31, 2025
 2.50 to 1.00 

January 31, 2026 and on the last day of each quarter thereafter
 2.00 to 1.00 

 


 
d.
Fixed
    Charge Coverage Ratio. Commencing with the quarter ending April 30, 2025, Borrowers shall maintain a Fixed Charge Coverage Ratio
    of not less than 1.20 to 1.00, measured on a quarterly basis as of the last day of each fiscal quarter for the trailing four (4)
    quarter period then ended.

 


 
e.
Minimum
    Adjusted EBITDA. Commencing with the quarter ending January 31, 2024, Borrowers shall maintain Adjusted EBITDA, measured on a
    quarterly basis as of the last day of each fiscal quarter, in an amount not less than the amounts (or, in the case of amounts set
    forth in parentheses, no worse than the amounts) set forth under the heading “Minimum Adjusted EBITDA” as of, and for
    each of the dates appearing adjacent to such “Minimum Adjusted EBITDA.

 SCHEDULE
OF MINIMUM ADJUSTED EBITDA



Quarter Ending 
Minimum Adjusted EBITDA 

January 31, 2024 
$(5,750,000)

April 30, 2024 
$(4,560,000)

July 31, 2024 
$(2,960,000)

October 31, 2024 
$(1,500,000)

January 31, 2025 
$430,000 

 

79
 

 
Schedule
II
 
Valuation
and Qualifying Accounts and Reserves
 
Streamline
Health Solutions, Inc and Subsidiaries.
For
the two years ended January 31, 2024
(in
thousands of dollars)
 


Description 
Balance at Beginning of Period  
Charged to Costs and Expenses  
 
(1)
Deductions – Other Accounts

 
 
(2) Deductions  
Balance at End of Period 

  
   
   
 
 
 
 
   
  

Year ended January 31, 2024: 
    
    
 
 
 
 
    
   

Allowance for doubtful accounts 
$132  
$(10) 
$
       (36
)
 
$— 
$86 

Year ended January 31, 2023: 
    
    
 
 
 
 
    
   

Allowance for doubtful accounts 
$76  
$189  
$
—
 
 
$(133) 
$132 

 


(1)
Adjustments to retained earnings for adoption of ASC 326-10, Financial Instruments—Credit Losses (Topic 326): Measurement of Credit
Losses on Financial Instruments (Refer to the subtopic of Accounting Pronouncements Recently Adopted in Note 2 – Significant Accounting
Policies to our consolidated financial statements included in Part II, Item 8, “Financial Statements and Supplementary Data”
for more information.)

(2)
Uncollectible accounts written off, net of recoveries.

 
 
Item
9. Changes in and Disagreements with Accountants on Accounting and Financial Disclosure
 
None.
 
Item
9A. Controls and Procedures
 
Evaluation
of Disclosure Controls and Procedures
 
Our
Chief Executive Officer (who serves as our principal executive officer) and our Chief Financial Officer (who serves as our principal
financial officer) have evaluated the effectiveness of our disclosure controls and procedures (as defined in Exchange Act Rule 13a-15(c))
as of the end of the period covered by this Report (January 31, 2024). Based on that evaluation, our Chief Executive Officer and Chief Financial Officer have concluded that our disclosure controls and procedures were effective as of January 31, 2024.
 
Management’s
Report on Internal Control Over Financial Reporting
 
Our
management is responsible for establishing and maintaining adequate internal control over financial reporting as such term is defined
in Rule 13a-15(f) of the Exchange Act. Our internal control over financial reporting is a process designed by, and under the supervision
of, our Chief Executive Officer and Chief Financial Officer and effected by our management and our Board of Directors to provide
reasonable assurance regarding the reliability of financial reporting and the preparation of financial statements for external purposes
in accordance with U.S. GAAP. Because of its inherent limitations, internal control over financial reporting may not prevent or detect
misstatements. Also, projections of any evaluation of effectiveness to future periods are subject to the risk that controls may become
inadequate because of changes in conditions, or that the degree of compliance with the policies or procedures may deteriorate.
 
An
internal control material weakness is a significant deficiency, or combination of significant deficiencies, that results in more than
a remote likelihood that a material misstatement of the consolidated financial statements will not be prevented or detected.
 
Our
management, including our principal executive officer and principal financial officer, conducted an evaluation of the effectiveness of
our internal control over financial reporting as of January 31, 2024, and concluded that our internal control over financial reporting
was effective as of January 31, 2024. In making the assessment of internal control over financial reporting, management used the criteria
established in Internal Control - Integrated Framework (1992) issued by the Committee of Sponsoring Organizations of the Treadway Commission
(COSO).
 


80
 

 

Changes
in Internal Control Over Financial Reporting
 
There
were no changes in our internal control over financial reporting (as defined in Rules 13a-15(f) and 15d-15(f) under the Exchange Act)
that occurred during the year ended January 31, 2024 that have materially affected, or are reasonably likely to materially affect, our
internal control over financial reporting.
 
We
have performed additional analyses and other procedures to enable management to conclude that our consolidated financial statements included
in this report fairly, in all material respects, our financial condition and results of operations as of the year ended January 31, 2024.
 
Item
9B. Other Information
 
None.
 
Item
9C. Disclosure Regarding Foreign Jurisdictions that Prevent Inspections
 
Not
applicable.
 
PART
III
 
Item
10. Directors, Executive Officers and Corporate Governance
 
Information
regarding directors, executive officers and corporate governance will be set forth in the proxy statement for our 2024 Annual Meeting,
which will be filed with the SEC within 120 days after the end of the fiscal year covered by this Report and is incorporated herein by
reference.
 
Item
11. Executive Compensation
 
Information
regarding executive compensation will be set forth in the proxy statement for our 2024 Annual Meeting, which will be filed with the SEC
within 120 days after the end of the fiscal year covered by this Report and is incorporated herein by reference.
 
Item
12. Securities Ownership of Certain Beneficial Owners and Management and Related Stockholder Matters
 
Information
regarding security ownership of certain beneficial owners and management and related stockholder matters will be set forth in the proxy
statement for our 2024 Annual Meeting, which will be filed with the SEC within 120 days after the end of the fiscal year covered by this
Report and is incorporated herein by reference.
 
Item
13. Certain Relationships and Related Transactions and Directors Independence
 
Information
regarding certain relationships and related transactions and director independence will be set forth in the proxy statement for our 2024
Annual Meeting, which will be filed with the SEC within 120 days after the end of the fiscal year covered by this Report and is incorporated
herein by reference.
 
Item
14. Principal Accountant Fees and Services
 
The
Independent Registered Public Accounting Firm is FORVIS, LLP (PCAOB Firm ID No. 686) located in Atlanta, Georgia. Information regarding
principal accountant fees and services will be set forth in the proxy statement for our 2024 Annual Meeting, which will be filed with
the SEC within 120 days after the end of the fiscal year covered by this Report and is incorporated herein by reference.
 

81
 

 
PART
IV
 


 
(32)
Item
    15. Exhibits and Financial Statement Schedules) See Index to Consolidated Financial Statements and Schedule Covered by
    Reports of Registered Public Accounting Firms included in Part II, Item 8, “Financial Statements and Supplementary Data,”
    of this Report. See Index to Exhibits contained in this Report.

 
(b)
Exhibits
 
See
Index to Exhibits contained in this Report.
 
Item
16. Form 10-K Summary
 
None.
 
INDEX
TO EXHIBITS

 


EXHIBITS
 
 

 
 
 

2.1
 
Unit Purchase Agreement, dated August 16, 2021, by and among Streamline Health Solutions, Inc., Avelead Consulting, LLC, Jawad Shaikh and Badar Shaikh (Incorporated by reference from Exhibit 2.1 of the Company’s Current Report on Form 8-K, as filed with the SEC on August 18, 2021).

3.1
 
Certificate of Incorporation of Streamline Health Solutions, Inc. f/k/a/ LanVision Systems, Inc., as amended through August 19, 2014 (Incorporated by reference from Exhibit 3.1 of the Company’s Quarterly Report on Form 10-Q, as filed with the SEC on September 15, 2014).

3.2
 
Certificate of Amendment of Certificate of Incorporation of Streamline Health Solutions, Inc. (Incorporated by reference from Exhibit 3.1 of the Company’s Current Report on Form 8-K, as filed with the SEC on May 24, 2021).

3.3
 
Certificate of Amendment of Certificate of Incorporation of Streamline Health Solutions, Inc. (Incorporated by reference from Exhibit 3.1 of the Company’s Current Report on Form 8-K, as filed with the SEC on June 8, 2022).

3.4
 
Amended and Restated Bylaws of Streamline Health Solutions, Inc., as amended and restated through March 28, 2014 (Incorporated by reference from Exhibit 3.1 of the Company’s Current Report on Form 8-K, as filed with the SEC on April 3, 2014).

4.1
 
Specimen
    Common Stock Certificate of Streamline Health Solutions, Inc. (Incorporated by reference from the Company’s Registration Statement
    on Form S-1, File Number 333-01494, as filed with the SEC on April 15, 1996).

4.2*
 
Description of Registrant’s Securities Registered Pursuant to Section 12 of the Securities Exchange Act of 1934.

4.3
 
Form of Warrant of Streamline Health Solutions, Inc. (Incorporated by reference from Exhibit 4.1 of the Company’s Current Report on Form 8-K, as filed with the SEC on February 7, 2024).

10.1#
 
Streamline Health Solutions, Inc. 1996 Associate Stock Purchase Plan, as amended and restated effective July 1, 2013 (Incorporated by reference from the Registration Statement on Form S-8, File Number 333-188763, as filed with the Commission on May 22, 2013).

10.2#
 
2005 Incentive Compensation Plan of Streamline Health Solutions, Inc. (Incorporated by reference from Exhibit 10.1 of the Company’s Current Report on Form 8-K, as filed with the SEC on May 26, 2005).

10.2(a)#
 
Amendment No. 2 to 2005 Incentive Compensation Plan of Streamline Health Solutions, Inc. (Incorporated by reference from Exhibit 4.3 of the Company’s Registration Statement on Form S-8, as filed with the SEC on November 15, 2012).

10.2(b)#
 
Amendment No. 3 to 2005 Incentive Compensation Plan of Streamline Health Solutions, Inc. (Incorporated by reference from Exhibit 10.2(c) of the Company’s Current Report on Form 8-K, as filed with the SEC on October 20, 2020).

10.2(c)#
 
Streamline Health Solutions, Inc. Third Amended and Restated 2013 Stock Incentive Plan (Incorporated by reference from Appendix A to the Company’s Definitive Proxy Statement on Schedule 14A, as filed with the SEC on April 22, 2019).

 



82
 

 


10.3#
 
Amendment No. 1 to Streamline Health Solutions, Inc. Third Amended and Restated 2013 Stock Incentive Plan (Incorporated by reference from Exhibit 10.1 of the Company’s Current Report on Form 8-K, as filed with the SEC on May 24, 2021).

10.3(a)#
 
Amendment No. 2 to Streamline Health Solutions, Inc. Third Amended and Restated 2013 Stock Incentive Plan (Incorporated by reference from Appendix B to the Company’s Definitive Proxy Statement on Schedule 14A, as filed with the SEC on May 9, 2022).


10.3(b)#
 
Amendment No. 3 to Streamline Health Solutions, Inc. Third Amended and Restated 2013 Stock Incentive Plan (Incorporated by reference from Appendix B to the Company’s Definitive Proxy Statement on Schedule 14A, as filed with the SEC on May 11, 2023).

10.3(c)#
 
Form of Restricted Stock Award Agreement for Non-Employee Directors (Incorporated by reference from Exhibit 10.2 of the Company’s Current Report on Form 8-K, as filed with the SEC on August 25, 2014).

10.3(d)#
 
Form of Restricted Stock Award Agreement for Executives (Incorporated by reference from Exhibit 10.3 of the Company’s Current Report on Form 8-K, as filed with the SEC on August 25, 2014).

10.3(e)#
 
Form of Stock Option Agreement for Executives (Incorporated by reference from Exhibit 10.4 of the Company’s Current Report on Form 8-K, as filed with the SEC on August 25, 2014).

10.4#
 
Employment Agreement, dated October 17, 2019, by and between the Company and Wyche T. “Tee” Green, III (Incorporated by reference from Exhibit 10.2 of the Company’s Current Report on Form 8-K, as filed with the SEC on October 18, 2019).

10.5#*
 
Employment Agreement, dated February 15, 2022, by and between the Company and Benjamin L. Stilwill.


10.6#
 
Employment Agreement, dated December 4, 2023, by and between the Company and Bryant James Reeves (Incorporated by reference to Exhibit 10.1 of the Company’s Current Report on Form 8-K, as filed with the SEC on December 7, 2023).

10.7#*
 
Employment Agreement, dated February 4, 2021, by and between the Company and Wendy L. Lovvorn.


10.8#
 
Employment Agreement dated September 10, 2018 by and between Streamline Health Solutions, Inc. and Thomas J. Gibson (Incorporated by reference from Exhibit 10.1 of the Company’s Quarterly Report on Form 10-Q, as filed with the SEC on September 12, 2018).

10.9#
 
Restricted Stock Agreement by and between Streamline Health Solutions, Inc. and Jawad Shaikh, dated as of August 16, 2021 (Incorporated by reference from Exhibit 10.1 of the Company’s Current Report on Form 8-K, as filed with the SEC on August 18, 2021).

10.10#
 
Restricted Stock Agreement by and between Streamline Health Solutions, Inc. and Badar Shaikh, dated as of August 16, 2021 (Incorporated by reference from Exhibit 10.2 of the Company’s Current Report on Form 8-K, as filed with the SEC on August 18, 2021).

10.11#
 
Form of Indemnification Agreement for all directors and officers of Streamline Health Solutions, Inc. (Incorporated by reference from Exhibit 10.1 of the Company’s Current Report on Form 8-K, as filed with the SEC on June 7, 2006).

10.12#
 
Restricted Stock Agreement by and between Streamline Health Solutions, Inc. and Badar Shaikh, dated as of August 16, 2021 (Incorporated by reference from Exhibit 10.2 of the Company’s Current Report on Form 8-K, as filed with the SEC on August 18, 2021).

10.13
 
Loan and Security Agreement dated as of December 11, 2019 by and among Bridge Bank, a division of Western Alliance Bank, Streamline Health Solutions, Inc. and Streamline Health, Inc. (Incorporated by reference from Exhibit 10.5 of the Company’s Quarterly Report on Form 10-Q, as filed with the SEC on January 7, 2020).

10.13(a)
 
Amended and Restated Loan and Security Agreement dated as of March 2, 2021 by and among Western Alliance Bank, Streamline Health Solutions, Inc. and Streamline Health, Inc. (Incorporated by reference from Exhibit 10.1 of the Company’s Current Report on Form 8-K, as filed with the SEC on March 2, 2021).

10.13(b)
 
Second Amended and Restated Loan and Security Agreement, dated August 26, 2021, by and among Streamline Health Solutions, Inc., Streamline Health, Inc., Streamline Pay & Benefits, LLC, Streamline Consulting Solutions, LLC, Avelead Consulting, LLC and Western Alliance Bank (Incorporated by reference from Exhibit 10.1 of the Company’s Current Report on Form 8-K, as filed with the SEC on August 30, 2021.

10.13(c)
 
Waiver of Second Amended and Restated Loan and Security Agreement, dated August 26, 2022, by and among the Company, Streamline Health, LLC, Streamline Pay & Benefits, LLC, Avelead Consulting, LLC, Streamline Consulting Solutions, LLC and Western Alliance Bank (Incorporated by reference from Exhibit 10.2 of the Quarterly Report on Form 10-Q, filed September 8, 2022).

10.13(d)
 
Second Modification to Second Amended and Restated Loan and Security Agreement, dated November 29, 2022, by and between Streamline Health Solutions, Inc. and certain of its subsidiaries party thereto, and Western Alliance Bank (Incorporated by reference from Exhibit 10.1 of the Current Report on Form 8-K, filed December 5, 2022).

10.13(e)
 
Third Modification to Second Amended and Restated Loan and Security Agreement, dated February 7, 2024, by and between Streamline Health Solutions, Inc. and certain of its subsidiaries party thereto, and Western Alliance Bank (Incorporated by reference from Exhibit 10.3 of the Current Report on Form 8-K, filed February 7, 2024).

 

83
 

 


10.14
 
Securities Purchase Agreement, dated October 10, 2019, between the Company and each purchaser identified on the signature pages thereto (Incorporated by reference from Exhibit 10.1 of the Company’s Current Report on Form 8-K, as filed with the SEC on October 11, 2019).

10.15
 
Registration Rights Agreement, dated October 10, 2019, between the Company and each of the several purchasers signatory thereto (Incorporated by reference from Exhibit 10.2 of the Company’s Current Report on Form 8-K, as filed with the SEC on October 11, 2019).

10.16
 
Form of Common Stock Purchase Agreement dated as of October 24, 2022, by and among Streamline Health Solutions, Inc. and the purchasers thereto (Incorporated by reference from Exhibit 10.1 of the Current Report on Form 8-K, filed October 27, 2022).

10.17
 
Master Services and Non-Disclosure Agreement, dated as of March 18, 2020, by and between Streamline Health Solutions, Inc. and 180 Consulting, LLC (Incorporated by reference from Exhibit 10.1 to the Company’s Current Report on Form 8-K, as filed with the SEC on March 25, 2020).

10.18
 
Sublease Agreement (Incorporated by reference from Exhibit 10.6 to the Company’s Quarterly Report on Form 10-Q, as filed with the SEC on June 11, 2020).

10.19
 
Form of Securities Purchase Agreement, by and among Streamline Health Solutions, Inc. and each purchaser identified on the signature pages thereto (Incorporated by reference from Exhibit 10.1 to the Company’s Current Report on Form 8-K, as filed with the SEC on February 7, 2024).

10.20
 
Form of Promissory Note of Streamline Health Solutions, Inc. (Incorporated by reference from Exhibit 10.2 of the Company’s Current Report on Form 8-K, as filed with the SEC on February 7, 2024).

21.1*
 
Subsidiaries of Streamline Health Solutions, Inc.

23.1*
 
Consent of Independent Registered Public Accounting Firm - FORVIS, LLP

24
 
Power of Attorney (included in signature page)

31.1*
 
Certification by Chief Executive Officer pursuant to Section 302 of the Sarbanes-Oxley Act of 2002.

31.2*
 
Certification by Chief Financial Officer pursuant to Section 302 of the Sarbanes-Oxley Act of 2002.

32.1*
 
Certification by Chief Executive Officer pursuant to U.S.C. Section 1350, as adopted pursuant to Section 906 of the Sarbanes-Oxley Act of 2002.

32.2*
 
Certification by Chief Financial Officer pursuant to U.S.C. Section 1350, as adopted pursuant to Section 906 of the Sarbanes-Oxley Act of 2002.

101
 
The
    following financial information from Streamline Health Solutions, Inc.’s Annual Report on Form 10-K for the fiscal year ended
    January 31, 2024 filed with the SEC on April 30, 2024, formatted in XBRL includes: (i) Consolidated Balance Sheets at January 31,
    2024 and 2023, (ii) Consolidated Statements of Operations for the two years ended January 31, 2024, (iii) Consolidated Statements
    of Changes in Stockholders’ Equity for the two years ended January 31, 2024, (iv) Consolidated Statements of Cash Flows for
    the two years ended January 31, 2024, and (v) the Notes to Consolidated Financial Statements.

101.INS
 
Inline
    XBRL Instance Document

101.SCH
 
Inline
    XBRL Taxonomy Extension Schema Document

101.CAL
 
Inline
    XBRL Taxonomy Extension Calculation Linkbase Document

101.DEF
 
Inline
    XBRL Taxonomy Extension Definition Linkbase Document

101.LAB
 
Inline
    XBRL Taxonomy Extension Label Linkbase Document

101.PRE
 
Inline
    XBRL Taxonomy Extension Presentation Linkbase Document

104
 
Cover
    Page Interactive Data File (embedded within the Inline XBRL document)

 


*
Filed
    herewith.

 
 

#
Management
    Contracts and Compensatory Arrangements.

 
 

 
Our
    SEC file number reference for documents filed with the SEC pursuant to the Exchange Act, is 000-28132.

 

84
 

 
SIGNATURES
 
Pursuant
to the requirements of Section 13 or 15(d) of the Securities Exchange Act of 1934, the Registrant has duly caused this report to be signed
on its behalf by the undersigned, thereunto duly authorized.
 


 
 
STREAMLINE
    HEALTH SOLUTIONS, INC.

 
 
 

 
By:
/S/
    BENJAMIN L. STILWILL

 
 
Benjamin
    L. Stilwill

 
 
President
    and Chief Executive Officer

  
POWER
OF ATTORNEY
 
Each
person whose signature appears below hereby constitutes and appoints Benjamin L. Stilwill and Bryant J. Reeves, III, and each of them,
his attorneys-in-fact, each with the power of substitution, for him and in his name, place and stead, in any and all capacities, to sign
this annual report on Form 10-K and any and all amendments to this annual report on Form 10-K, and to file the same, with all exhibits
thereto and all documents in connection therewith, with the Securities and Exchange Commission, granting unto said attorneys-in-fact
and agents, and each of them, full power and authority to do and perform each and every act and all intents and purposes as he might
or could do in person, hereby ratifying and confirming all that such attorneys-in-fact and agents or any of them or his or their substitute
or substitutes, may lawfully do or cause to be done by virtue hereof.
 
DATE:
April 30, 2024
 
Pursuant
to the requirements of the Securities Exchange Act of 1934, this report has been signed below by the following persons on behalf of the
registrant in the capacities and on the date indicated.
 


/s/
    WYCHE T. “TEE” GREEN, III
 
Executive
    Chairman and Chairman of the Board
 
April
    30, 2024

Wyche
    T. “Tee” Green, III
 
 
 
 

 
 
 
 
 

/S/
    BENJAMIN L. STILWILL
 
President,
    Chief Executive Officer and Director
 
April
    30, 2024

Benjamin
    L. Stilwill
 
(Principal
    Executive Officer)
 
 

 
 
 
 
 

/s/ BRYANT J. REEVES, III
 
Chief Financial Officer
 
April 30,2024

Bryant J. Reeves, III
 
(Principal Financial Officer and

 
 

 
 
Principal Accounting Officer)
 
 

 
 
 
 
 

/s/
    JONATHAN R. PHILLIPS
 
Director
 
April
    30, 2024

Jonathan
    R. Phillips
 
 
 
 

 
 
 
 
 

/s/
    JUSTIN FERAYORNI
 
Director
 
April
    30, 2024

Justin
    Ferayorni
 
 
 
 

 
 
 
 
 

/s/
    JUDITH E. STARKEY
 
Director
 
April
    30, 2024

Judith
    E. Starkey
 
 
 
 

 
 
 
 
 

/s/
    KENAN H. LUCAS
 
Director
 
April
    30, 2024

Kenan
    H. Lucas
 
 
 
 

 
 
 
 
 

/s/
    MATTHEW ETHERIDGE
 
Director
 
April
    30, 2024

Matthew
    Etheridge
 
 
 
 

 


85





